Financial Terms Glossary
Clear, practical definitions of essential financial terms. Each term links to relevant calculators and tools to help you take action.
Browse by Category
Banking & Savings
APY (Annual Percentage Yield)
The effective annual rate of return on savings, accounting for compound interest.
CD Ladder
A savings strategy where you divide money across multiple CDs with different maturity dates to balance higher rates with liquidity.
Cash Back
A credit card reward that returns a percentage of your spending as cash, typically 1-5% depending on the category.
High-Yield Savings Account
A savings account that pays significantly higher interest rates (typically 4-5% APY) than traditional bank accounts (0.01% APY), usually offered by online banks.
Rolling CD
A CD laddering strategy where you invest in multiple CDs with different maturity dates to balance higher yields with liquidity needs.
Behavioral Finance
Business
Accounting
Accounting tracks financial activity, helping businesses make informed decisions and ensure compliance.
Accrual Accounting
Accrual accounting records revenues and expenses when they are earned or incurred, enhancing financial clarity and insight.
C-Corporation
A C-Corporation is a legal entity that protects owners' personal assets while allowing for unlimited growth potential.
Cash Basis Accounting
A simple accounting method that records revenue and expenses when cash changes hands, enhancing clarity in financial management.
Freelancing
Freelancing offers flexibility and independence, allowing you to earn income on your own terms.
LLC (Limited Liability Company)
An LLC protects your personal assets while offering tax flexibility and less paperwork than a corporation.
Partnership
A partnership is a business structure where two or more individuals share ownership and profits, maximizing resources and expertise.
S-Corporation
An S-Corporation is a tax-efficient business structure that helps reduce self-employment taxes.
Business & Investing
Break-Even Analysis
A calculation that determines the point at which total revenue equals total costs, showing how many units must be sold or how much revenue is needed before a business becomes profitable.
CAC (Customer Acquisition Cost)
The total cost of acquiring a new customer, including marketing and sales expenses.
Contribution Margin
The amount each unit sold contributes toward covering fixed costs and generating profit.
DSCR (Debt Service Coverage Ratio)
A measure of cash flow available to pay debt obligations, calculated as annual net operating income divided by annual debt payments.
LTV (Customer Lifetime Value)
The total revenue a business expects to earn from a customer over their entire relationship.
ROAS (Return on Ad Spend)
A marketing metric that measures revenue generated for every dollar spent on advertising.
SBA Loan
A small business loan partially guaranteed by the U.S. Small Business Administration, offering longer terms and lower rates than conventional business loans.
Career & Income
AGI (Adjusted Gross Income)
Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.
After-Tax Income
Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.
FICA (Federal Insurance Contributions Act)
Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).
Gross Income
Your total income before any taxes or deductions are taken out—the starting point for tax calculations.
Marginal Tax Rate
The tax rate applied to your last dollar of income—the rate you pay on additional earnings.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.
Tax Bracket
The range of income taxed at a specific rate under the U.S. progressive tax system.
Tax Withholding
The amount of federal and state income tax that your employer automatically deducts from each paycheck and sends to the government on your behalf.
Vesting
The process of earning full ownership of employer-provided benefits like 401(k) matching contributions or stock options over time.
W-2 Form
An annual tax document from employers showing your total wages and taxes withheld for the year.
Cryptocurrency
Bitcoin
Bitcoin is a decentralized digital currency that empowers users with financial autonomy and investment potential.
Blockchain
A decentralized digital ledger that enhances transparency and security in transactions.
Cryptocurrency
Digital currencies that use cryptography for secure transactions and can offer investment opportunities.
Exchange Crypto
Exchange crypto to trade digital currencies and maximize investment potential.
Wallet Crypto
A digital wallet for storing and managing cryptocurrencies securely, essential for transactions and investments.
Debt & Credit
APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Annual Fee
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.
Balloon Payment
A large lump-sum payment due at the end of some loans after a period of smaller monthly payments.
Bankruptcy
Bankruptcy is a legal process that helps individuals or businesses eliminate or repay debts, providing a fresh start.
Chapter 11 Bankruptcy
A legal process allowing businesses to reorganize debts while continuing operations, crucial for financial recovery.
Chapter 13 Bankruptcy
A repayment plan that helps individuals manage debt and keep assets while avoiding foreclosure.
Chapter 7 Bankruptcy
A legal way to eliminate most debts, allowing a fresh financial start.
Credit Card Debt
Credit card debt is money owed on credit cards, impacting finances and credit scores.
Credit Counseling
Credit counseling helps individuals manage debt and improve financial literacy for a stable financial future.
Credit Freeze
A credit freeze restricts access to your credit report, helping prevent identity theft.
Credit Monitoring
Credit monitoring tracks your credit report for changes, helping you spot fraud and improve your credit score.
Credit Rating
A credit rating assesses your creditworthiness, impacting loan terms and interest rates.
Credit Score
A credit score predicts your creditworthiness, influencing loan rates and approval chances.
Credit Utilization Ratio
The percentage of available credit you're using, calculated by dividing total credit card balances by total credit limits.
Debt Avalanche Method
A debt payoff strategy where you pay minimums on all debts, then put extra money toward the highest interest rate debt first.
Debt Consolidation
The process of combining multiple debts into a single loan with a lower interest rate to simplify payments and reduce costs.
Debt Management Plan
A structured program to pay off debt efficiently, helping you regain financial stability.
Debt Settlement
A negotiation process to reduce total debt owed, helping you save money and regain control of finances.
Debt Snowball Method
A debt payoff strategy where you pay minimums on all debts, then focus extra payments on the smallest balance first for psychological wins.
Debt-to-Income Ratio (DTI)
Percentage of gross monthly income that goes toward debt payments.
Delayed Retirement Credits
Delaying retirement increases your benefit, boosting your monthly Social Security payments.
Earned Income Tax Credit
A refundable tax credit that boosts income for low to moderate earners, making a real financial difference.
Equal Credit Opportunity Act
A federal law ensuring fair access to credit for all consumers, regardless of background.
Extra Payments (Loan Acceleration)
Additional principal payments beyond the required monthly amount that reduce total interest and shorten loan payoff time.
FICO Score
A three-digit credit score (300-850) calculated by Fair Isaac Corporation, used by lenders to assess creditworthiness.
Fair Credit Reporting Act
This law ensures your credit report is accurate and fair, impacting loan access and rates.
Fair Debt Collection Practices Act
A law ensuring fair treatment of consumers by debt collectors, protecting against abusive practices.
Foreclosure
Foreclosure is a legal process where a lender reclaims property due to unpaid mortgage debt, impacting credit and homeownership.
Grace Period
Interest-free period (21-25 days) between purchase and payment due date. Only applies if you pay statement balance in full each month.
IBR Plan (Income-Based Repayment)
An income-driven repayment plan requiring 10-15% of discretionary income with forgiveness after 20-25 years, ideal for borrowers whose debt exceeds their income.
ICR Plan (Income-Contingent Repayment)
The oldest income-driven plan with 20% discretionary income payments or a 12-year fixed amount, with forgiveness after 25 years—the only IDR option for Parent PLUS loans.
LTV (Loan-to-Value Ratio)
The percentage of the loan amount compared to the appraised value of the asset being purchased.
Late Fee
Penalty for missing payment due date—up to $40 per occurrence. Also triggers penalty APR up to 29.99% and damages credit score.
Loan Term
The length of time you have to repay a loan, typically expressed in months or years.
Loan Term
The loan term is the duration for repaying a loan, impacting your monthly payments and total interest costs.
Minimum Payment
Lowest payment card companies accept—usually 1-3% of balance. Paying only the minimum traps you in debt for decades with massive interest.
Negative Equity
When you owe more on a loan than the asset is worth—also called being 'underwater'.
Origination Fee
An upfront fee charged by lenders to process and approve a loan, typically 0.5-1% of the loan amount.
Over-the-Limit Fee
Fee charged when balance exceeds credit limit—up to $35. Now requires opt-in. Better to decline and have charges rejected than pay fees.
PAYE Plan (Pay As You Earn)
An income-driven repayment plan with 10% discretionary income payments, capped at the Standard amount, with forgiveness after 20 years for recent borrowers.
PSLF (Public Service Loan Forgiveness)
A federal program that forgives remaining student loan debt after 120 qualifying monthly payments while working full-time for a qualifying employer.
Parent PLUS Loan
A federal student loan that parents of dependent undergraduate students can borrow to help pay for college costs not covered by other financial aid.
Payday Loan
A payday loan is a short-term, high-interest loan designed to cover urgent expenses until your next paycheck.
Payment Frequency
How often you make loan or mortgage payments—monthly, bi-weekly, semi-monthly, or weekly—which can significantly impact total interest paid.
Personal Loan
A personal loan is an unsecured loan that can help you finance personal expenses, often with lower interest rates than credit cards.
Pre-Approval
Getting financing approved before shopping, giving you negotiating power and budget clarity.
Principal
The original amount of money borrowed in a loan or invested in an account, excluding interest.
Secured Loan
A loan backed by collateral (like a vehicle or property) that the lender can repossess if you default.
Standard Repayment Plan
The default 10-year student loan repayment plan with fixed monthly payments, designed to pay off loans completely in 120 equal payments.
Student Loan Debt
A financial obligation incurred for education, impacting future finances and opportunities.
Title Loan
A title loan is a quick way to borrow money using your vehicle as collateral, often available with high interest rates.
Unsecured Loan
An unsecured loan is a debt not backed by collateral, offering flexibility but often higher interest rates.
Economic & Inflation
Cost of Living Adjustment (COLA)
Regional variations in expenses that affect how much it costs to raise a child, with urban areas typically 20-50% more expensive than rural areas.
Dynamic Currency Conversion (DCC)
When merchants abroad offer to charge your card in your home currency instead of local currency, usually with hidden markup of 3-7%.
Exchange Rate
The value of one currency in terms of another—how many euros you get for a dollar, for example.
Foreign Transaction Fee
A fee charged by credit card companies for transactions in foreign currencies, typically 1-3% of the purchase amount.
Gini Coefficient
A measure of income inequality ranging from 0 (perfect equality) to 100 (one person has everything), showing how evenly or unevenly income is distributed.
PPP (Purchasing Power Parity)
An economic measure that compares currencies by how much goods and services they can buy in different countries.
Economic Indicators
CPI (Consumer Price Index)
A government measure of inflation that tracks the average change in prices consumers pay for goods and services over time.
Deflation
A general decrease in the price level of goods and services, the opposite of inflation.
Purchasing Power
The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
Economics
Federal Funds Rate
Interest rate banks charge each other for overnight loans. Set by Federal Reserve. Controls all other interest rates—mortgages, credit cards, savings.
Inverted Yield Curve
Short-term bonds pay higher rates than long-term bonds. Recession predictor—has preceded every recession since 1950, usually by 12-24 months.
Market Correction
10-20% market decline from recent peak. Healthy and common—happens every 1-2 years. Not as severe as 20%+ bear market.
Prime Rate
Interest rate banks charge most creditworthy customers. Usually Fed funds rate + 3%. Credit cards and HELOCs tied to prime rate.
Recession
Economic downturn with declining GDP, rising unemployment, and reduced spending. Technically 2 consecutive quarters of negative GDP growth.
Stagflation
Stagnant economy with high inflation—worst of both worlds. Rising prices + high unemployment + no growth. Rare but devastating.
Yield Curve
Graph showing bond yields across different maturities. Normal = upward slope (long-term pays more). Inverted = recession warning.
Economics & Markets
Education & Career
529 Plan (Qualified Tuition Plan)
A tax-advantaged savings plan designed to encourage saving for future education costs, with tax-free growth and withdrawals for qualified expenses.
EFC (Expected Family Contribution)
The amount of money your family is expected to contribute toward college costs for one year, calculated by the FAFSA formula.
Estate Planning
Estate Planning
Estate planning ensures your assets are distributed according to your wishes after death, minimizing taxes and family disputes.
Inheritance
Inheritance is assets passed to heirs, crucial for financial stability and legacy planning.
Irrevocable Trust
An irrevocable trust protects assets from taxes and creditors, providing peace of mind and financial security.
Living Will
A living will specifies your medical preferences if you can't communicate, ensuring your wishes are honored.
Revocable Trust
A revocable trust is a flexible estate planning tool that allows you to manage assets during your lifetime and simplify transfers after death.
Trust
A trust is a legal arrangement that manages assets for beneficiaries, ensuring efficient wealth transfer and tax benefits.
Trustee
A trustee manages assets for beneficiaries, ensuring proper distribution and compliance with legal obligations.
Will
A will is a legal document that specifies how your assets should be distributed after your death, ensuring your wishes are honored.
Everyday Math
Family & Parenting
Child Tax Credit
Federal tax credit of up to $2,000 per qualifying child under 17, reducing your tax bill dollar-for-dollar.
Child and Dependent Care Tax Credit
Tax credit for childcare expenses while you work, worth up to $2,100 for two or more children (up to 35% of $6,000 in expenses).
Dependent Care FSA
Pre-tax savings account for childcare expenses, allowing you to set aside up to $5,000/year tax-free to pay for daycare and after-school care.
Kiddie Tax
A tax rule that taxes unearned income (dividends, interest, capital gains) of children under 19 at their parents' higher tax rate.
General Finance
APR vs Interest Rate
APR reflects total borrowing costs; interest rate only shows the cost of borrowing money.
AUM Fee (Assets Under Management Fee)
AUM fees are charges based on the total assets managed, impacting investment returns.
Accounts Payable
Accounts payable are short-term liabilities that a business owes to suppliers for goods or services received.
Accounts Receivable
Accounts receivable is money owed to a business, crucial for cash flow management.
Active Investing
Active investing is a strategy aimed at outperforming market averages through frequent trading and analysis.
Advance Directive
A legal document outlining your healthcare preferences, ensuring your wishes are honored when you can't voice them.
Asset
An asset is anything of value owned by an individual or entity, crucial for building wealth and financial security.
Audit
An audit is a systematic review of financial records to ensure accuracy and compliance, helping to avoid costly mistakes.
Back End Load
A back end load is a fee charged when selling mutual fund shares, impacting your investment returns.
Balance Sheet
A balance sheet shows what you own and owe, helping assess financial health and make informed decisions.
Book Value
Book value is the net asset value of a company, helping investors assess its worth and potential profitability.
Bookkeeping
Bookkeeping tracks your financial transactions, ensuring accuracy and facilitating informed decisions.
Break Even Point
The break even point is where total revenues equal total costs, helping you assess profitability.
Brokerage Account
A brokerage account lets you buy and sell investments, helping you grow wealth over time.
Business Expenses
Costs incurred in running a business that can reduce taxable income and improve cash flow.
Buy And Hold
A long-term investment strategy focusing on buying stocks and holding them for years to capitalize on growth.
CCPA (California Consumer Privacy Act)
The CCPA enhances privacy rights for Californians, empowering them to control personal data usage.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA allows you to continue health insurance coverage after job loss, crucial for financial stability.
Call Option
A call option gives you the right to buy an asset at a set price, allowing profit from price increases.
Cash Flow Statement
A cash flow statement tracks cash inflows and outflows, helping you manage finances effectively.
Catch Up Contributions
Extra savings allowed for those 50+ to boost retirement funds and secure financial future.
Collateral
Collateral is an asset pledged as security for a loan, reducing lender risk and enabling easier borrowing.
Commission Based Advisor
A commission-based advisor earns fees from product sales, impacting your investment costs and choices.
Compliance
Compliance ensures businesses follow laws, reducing risks and enhancing trust.
Compounding
Compounding is earning interest on interest, maximizing your investment growth over time.
Consumer Protection
Consumer protection safeguards buyers against unfair practices, ensuring fair treatment and product safety.
Contribution Limit
A contribution limit is the maximum amount you can legally invest in a financial account, helping you save effectively.
Correction
A market correction is a decline of 10% or more from a recent peak, signaling potential buying opportunities.
Cosigner
A cosigner helps individuals secure loans by guaranteeing repayment, improving approval odds and terms.
Cost Of Goods Sold
COGS measures direct costs of producing goods sold, crucial for profit analysis.
Cpa
A CPA is a certified public accountant who can enhance your financial health through expert tax advice and planning.
Daily Interest
Daily interest is the amount of interest accrued each day on a principal balance, crucial for understanding loan costs.
Data Breach
A data breach is an incident where sensitive information is accessed illegally, risking financial loss and identity theft.
Deed In Lieu
A deed in lieu allows homeowners to transfer property to lenders to avoid foreclosure, preserving credit and reducing debt.
Default
Default is failing to meet loan obligations, impacting credit and future borrowing options.
Defined Benefit Plan
A retirement plan where employer guarantees a specific payout, ensuring financial security in retirement.
Defined Contribution Plan
A retirement plan where contributions are made by you and/or your employer, impacting your future savings.
Depreciation Business
Depreciation reduces asset value over time, impacting taxes and cash flow management.
Depression
A severe economic downturn impacting jobs, investments, and spending.
Derivatives
Derivatives are financial contracts that derive value from underlying assets, helping manage risk and enhance returns.
Discount Rate
The discount rate is the interest rate used to determine the present value of future cash flows, crucial for investment decisions.
EPO (Exclusive Provider Organization)
An EPO limits coverage to a network of providers, often lowering costs for members.
Earnings Per Share
Earnings Per Share (EPS) measures a company's profitability, indicating how much profit is allocated to each outstanding share.
Emergency Liquidity
Emergency liquidity is cash available for urgent needs, ensuring financial stability in crises.
Encryption
Encryption is a security method that protects sensitive data, ensuring privacy and integrity in financial transactions.
Equity
Equity represents ownership in an asset, crucial for wealth building and financial security.
Ethereum
Ethereum is a blockchain platform enabling decentralized apps, crucial for modern finance and digital assets.
Executor
An executor manages your estate after you pass, ensuring your wishes are fulfilled and debts are settled.
FDIC (Federal Deposit Insurance Corporation)
The FDIC insures deposits up to $250,000, protecting your savings from bank failures.
FINRA (Financial Industry Regulatory Authority)
FINRA oversees brokers and ensures fair markets, protecting investors' interests.
Fair Value
Fair value is an asset's true worth in the market, crucial for informed investment decisions.
Fed Funds Rate
The Fed Funds Rate is the interest rate at which banks lend to each other overnight, influencing overall economic activity.
Federal Reserve
The Federal Reserve controls U.S. monetary policy to stabilize the economy and influence inflation and employment.
Fiduciary
A fiduciary is a trusted advisor required to act in your best financial interest.
Financial Advisor
A financial advisor helps you manage investments and plan for financial goals, enhancing your financial well-being.
Financial Planning
A strategic approach to managing finances, ensuring a secure future and achieving financial goals.
Financial Statements
Financial statements summarize a company's financial performance and position, crucial for informed decision-making.
Fixed Expenses
Fixed expenses are regular, unchanging costs essential for living, helping you budget effectively.
Form 1099
Form 1099 reports income from sources other than wages, aiding tax compliance.
Form W-4
Form W-4 helps you adjust your tax withholding to optimize your paycheck and tax refund.
Fraud Alert
A fraud alert warns creditors to verify identity before granting credit, protecting against identity theft.
Front End Load
A front end load is a fee charged when you purchase shares in a mutual fund, impacting your investment's initial value.
Futures
Futures are contracts to buy or sell assets at predetermined prices, helping manage risk and speculate on price movements.
GDP (Gross Domestic Product)
GDP measures a country's economic performance and growth potential, directly impacting investment decisions.
GDPR (General Data Protection Regulation)
GDPR protects personal data in the EU, enhancing privacy rights and ensuring compliance for businesses.
Gig Economy
A labor market with flexible, short-term jobs that boost income and autonomy.
Gross Profit
Gross profit is revenue minus the cost of goods sold, reflecting a company's profitability on sales.
Guarantor
A guarantor is someone who agrees to pay a loan if the borrower defaults, enhancing loan approval chances.
HDHP (High Deductible Health Plan)
An HDHP is a health insurance plan with higher deductibles, offering lower premiums and potential tax benefits.
Healthcare Costs
Healthcare costs refer to expenses for medical services, impacting budgets and financial planning.
Healthcare Proxy
A healthcare proxy designates someone to make medical decisions on your behalf when you're unable to do so.
Hoa Fees
HOA fees are monthly or yearly charges for community upkeep and amenities, enhancing property value.
House Hacking
House hacking allows you to reduce living costs by renting out part of your home.
Hyperinflation
Hyperinflation is a rapid, excessive price increase that erodes currency value, impacting savings and purchasing power.
Identity Theft
Identity theft is when someone steals your personal information to commit fraud, impacting your finances and credit.
Illiquid Asset
An illiquid asset is hard to quickly sell for cash, affecting your financial flexibility.
Interest Rate
The cost of borrowing money or the return on savings, crucial for financial planning.
Interest Rates Economy
Interest rates influence borrowing costs, spending, and economic growth, affecting your finances significantly.
Intrinsic Value
Intrinsic value is the true worth of an asset, guiding investment decisions for better returns.
Investment Grade
Investment grade refers to bonds rated BBB- or higher, indicating lower risk and stable returns for investors.
LIBOR (London Interbank Offered Rate)
LIBOR is a benchmark interest rate that influences global borrowing costs and financial products.
Leverage
Leverage amplifies your investment potential by using borrowed funds, enhancing returns on your own capital.
Liability
A liability is a financial obligation that requires payment, impacting your net worth and cash flow.
Liquid Asset
Liquid assets are easily accessible funds, crucial for financial flexibility and emergency needs.
Load Vs No Load
Load funds charge fees; no-load funds do not, impacting your investment returns.
Longevity Risk
The risk of outliving your savings, impacting retirement security.
Lump Sum Investing
Investing a large sum of money at once for potential higher returns.
Management Fee
A management fee compensates professionals for overseeing investments, impacting your overall returns.
Margin
Margin is borrowed money used to invest, allowing for greater potential returns but also higher risk.
Margin Call
A margin call occurs when your investment account falls below the required equity, prompting additional funds to avoid liquidation.
Market Capitalization
Market capitalization measures a company's total value, guiding investment decisions.
Market Timing
The strategy of buying and selling investments based on predicted market movements to maximize returns.
Medigap
Medigap supplements Medicare, covering out-of-pocket costs like copayments and deductibles.
Mega Backdoor Roth
A strategy allowing high earners to contribute up to $38,000 to a Roth IRA, boosting tax-free retirement savings.
Net Profit
Net profit is your total earnings after all expenses; it shows your business's true profitability.
Open Enrollment
Open Enrollment is a designated period to enroll in health coverage, vital for ensuring access to medical services.
Operating Expenses
Operating expenses are the costs required to run a business, crucial for measuring profitability.
Options
Options are contracts that grant the right to buy or sell an asset at a set price, offering potential profit with limited risk.
PCE (Personal Consumption Expenditures)
PCE measures consumer spending, crucial for understanding economic health and inflation.
Passive Investing
A low-cost investment strategy aiming for long-term growth without frequent trading.
Password Manager
A password manager securely stores and organizes your passwords, enhancing online security and saving time.
Paycheck To Paycheck
Living paycheck to paycheck means relying on each paycheck to cover immediate expenses, making financial stability challenging.
Payment History
Payment history reflects your record of on-time and late payments, influencing your credit score significantly.
Phishing
Phishing is a fraudulent attempt to obtain sensitive information, often leading to financial loss.
Pos
Point of Sale (POS) is where sales transactions occur, crucial for tracking sales and managing inventory.
Power Of Attorney
A legal document allowing someone to make decisions on your behalf, crucial for protecting your interests.
Predatory Lending
Predatory lending exploits borrowers with unfair terms, leading to financial harm.
Price To Earnings Ratio
The Price To Earnings Ratio (P/E) measures stock price relative to earnings, helping assess investment value.
Private Key
A private key is a secure code that grants access to cryptocurrency, protecting your assets from unauthorized access.
Probate
Probate is the legal process of validating a will, ensuring proper asset distribution after death.
Profit
Profit is the financial gain from business activities, crucial for growth and sustainability.
Profit Margin
Profit margin measures how much profit a company makes for every dollar of sales, indicating financial health.
Public Key
A public key encrypts data for secure communication, essential for online security and transactions.
Put Option
A put option gives you the right to sell an asset at a set price, protecting against losses.
Refinancing
Refinancing replaces your existing debt with a new loan for better terms, saving money and improving cash flow.
Regulation
Regulation ensures fair practices in finance, protecting consumers and maintaining market stability.
Required Minimum Distribution
RMDs are mandatory withdrawals from retirement accounts to ensure you use your savings during retirement.
Revenue
Revenue is the total income generated by a business, crucial for growth and sustainability.
Risk
Risk is the chance of losing money on an investment, which helps you assess potential returns.
Risk Capacity
Risk capacity is your financial ability to take on risk without jeopardizing your goals.
Robo Advisor
A robo advisor automates investment management, making it easy and affordable for everyone to grow their wealth.
SEC (Securities and Exchange Commission)
The SEC protects investors and maintains fair markets, ensuring transparency in securities transactions.
SIPC (Securities Investor Protection Corporation)
SIPC protects investors by covering losses up to $500,000 if a brokerage fails.
SOFR (Secured Overnight Financing Rate)
SOFR is a benchmark interest rate that reflects the cost of borrowing cash overnight, crucial for loans and derivatives pricing.
Self Employment
Self employment allows individuals to earn income independently, providing flexibility and control over their work life.
Sequence Of Returns Risk
The risk of receiving lower or negative investment returns before retirement can significantly impact your savings longevity.
Short Sale
A short sale is selling an asset you don't own, aiming to profit from a price drop.
Short Selling
Short selling is a strategy to profit from declining stock prices by borrowing shares and selling them.
Side Hustle
A side hustle is a part-time endeavor that boosts income and enhances financial security.
Simple Interest
Simple interest is a straightforward way to calculate interest on loans or investments, helping you understand total costs or earnings.
Small Business
A small business is a privately owned company that typically has fewer than 500 employees and plays a crucial role in the economy.
Social Engineering
Manipulative tactics used to deceive individuals into divulging confidential information.
Sole Proprietorship
A sole proprietorship is a simple business structure that offers full control and tax benefits to the owner.
Special Enrollment Period
A time frame allowing you to enroll in health coverage outside the annual open enrollment, crucial for timely access to care.
Speculative Grade
Speculative grade bonds carry higher risk but offer potential for greater returns, making them crucial for savvy investors.
Spousal Benefits
Spousal benefits enhance financial security for partners through social security or pension plans.
Stablecoin
A stablecoin is a cryptocurrency pegged to a stable asset, providing price stability and usability.
Stepped Up Basis
A tax benefit where inherited assets are valued at their current market value, reducing capital gains taxes.
Strike Price
The strike price is the predetermined price at which an option can be exercised, crucial for potential profit.
Survivor Benefits
Survivor benefits provide financial support to dependents after a primary earner's death, ensuring stability.
The 4% Rule
The 4% Rule helps retirees withdraw funds safely from savings, ensuring longevity of their portfolio.
The 50/30/20 Rule
A budgeting strategy allocating 50% needs, 30% wants, and 20% savings for financial balance.
Time Horizon
The period until an investment goal is reached, influencing risk and strategy.
Time Value Of Money
Money available today is worth more than the same amount in the future due to its earning potential.
Truth In Lending Act
The Truth In Lending Act ensures borrowers receive clear information about loan terms, helping them make informed decisions.
Two Factor Authentication
A security measure that requires two forms of verification to access accounts, greatly reducing fraud risk.
Unemployment Rate
The unemployment rate measures the percentage of jobless people actively seeking work, highlighting economic health.
Usury
Usury is the practice of charging excessively high-interest rates on loans, which can lead to financial distress.
Variable Expenses
Variable expenses fluctuate and can be controlled, helping you manage your budget effectively.
Health & Wellness
Healthcare
Coinsurance
Percentage of medical costs you pay after meeting deductible. 20% coinsurance on $1,000 bill = you pay $200, insurance pays $800.
Copay (Copayment)
Fixed dollar amount paid for doctor visits, prescriptions, or services. $30 specialist visit copay means you pay $30, insurance covers rest.
FSA (Flexible Spending Account)
A pre-tax account for medical expenses that must be used within the plan year or you lose the money (use-it-or-lose-it rule).
HMO (Health Maintenance Organization)
An HMO offers low-cost health insurance with a focus on preventive care and a network of providers.
In-Network
Doctors and hospitals contracted with your insurance for pre-negotiated rates. Lower costs, higher coverage. Always use in-network when possible.
Medicare
Medicare is a federal health insurance program for those 65+ and certain younger people, crucial for managing healthcare costs.
Medicare Advantage
Medicare Advantage is a private plan that covers Medicare benefits, often with extra perks.
Medicare Part A
Medicare Part A covers hospital care, making essential services affordable for seniors and eligible individuals.
Medicare Part B
Medicare Part B covers outpatient care, helping you save on doctor visits and preventive services.
Medicare Part D
Medicare Part D helps cover prescription drug costs for eligible individuals, reducing out-of-pocket expenses.
Out-of-Network
Doctors not contracted with your insurance. Higher costs, lower coverage, potential balance billing. Avoid except emergencies.
Out-of-Pocket Maximum
Most you pay for covered services in a year. Includes deductible, copays, coinsurance. Once hit, insurance pays 100% rest of year.
PPO (Preferred Provider Organization)
A PPO offers flexible healthcare choices and lower costs when using in-network providers, promoting better health management.
Healthcare & Insurance
ADLs (Activities of Daily Living)
Six basic self-care tasks—like bathing and dressing—that determine long-term care eligibility.
Any Occupation
Disability coverage that only pays benefits if you cannot work in any reasonable job based on your experience and education.
Assisted Living
Housing for people who need help with daily tasks but not round-the-clock medical care.
Beneficiary
The person, trust, or organization that receives the life insurance payout.
Benefit Period
How long your disability insurance will pay benefits once a qualifying claim is approved.
Cash Value
The savings component inside certain permanent life insurance policies.
DIME Method
A rule of thumb for estimating life insurance needs: Debt, Income, Mortgage, Education.
Daily Benefit Amount
The maximum your long-term care policy will pay per day for covered services.
Death Benefit
The lump sum paid to beneficiaries when the insured person dies.
Deductible
The amount you must pay out-of-pocket before insurance coverage kicks in.
Elimination Period
The waiting period before disability insurance benefits start—think of it as a time-based deductible.
HSA (Health Savings Account)
A tax-advantaged savings account for medical expenses, available only with high-deductible health plans.
Home Health Care
Skilled nursing or personal care delivered in your home by licensed professionals.
Income Replacement Ratio
The percentage of your paycheck a disability policy will replace while you are on claim.
Inflation Protection
A rider that raises your long-term care benefit each year so it keeps up with rising costs.
Nursing Home Care
24-hour skilled care in a licensed facility for people with significant medical or custodial needs.
Own Occupation
Disability insurance that pays if you cannot perform the specific duties of your current job—even if you can work elsewhere.
Residual Disability Benefit
A rider that pays partial disability benefits when you can work part-time but lose a portion of your income.
Term Life Insurance
Life insurance that covers you for a set period (typically 10, 20, or 30 years) with no cash value.
Whole Life Insurance
Permanent coverage that lasts your entire life and builds a slow-growing cash value.
Housing & Real Estate
30% Rent Rule
A budgeting guideline stating that housing costs should not exceed 30% of gross monthly income to maintain financial stability.
Adjustable Rate Mortgage
An Adjustable Rate Mortgage (ARM) offers lower initial rates that can change over time, making homeownership more affordable.
Escrow Account
A separate account where lenders hold funds for property taxes and insurance, ensuring these bills are paid on time.
FHA Loan
A government-backed mortgage insured by the Federal Housing Administration, allowing low down payments (as low as 3.5%) and lower credit scores.
Fixed Rate Mortgage
A fixed rate mortgage offers a stable interest rate, ensuring consistent monthly payments over the loan's lifespan.
HELOC (Home Equity Line of Credit)
A revolving credit line secured by your home equity, allowing you to borrow money as needed up to a preset limit.
Investment Property
An investment property generates rental income or capital appreciation, making it a key wealth-building asset.
Joint Tenancy
A form of property ownership where two or more people own equal shares with automatic transfer to survivors upon death.
Mortgage
A mortgage is a loan to buy property, enabling homeownership with manageable payments over time.
PMI (Private Mortgage Insurance)
Extra monthly cost added to mortgage if down payment is less than 20% of home value.
Points Mortgage
A points mortgage lets you pay upfront fees to lower your interest rate, saving money over time.
Real Estate Appreciation
Real estate appreciation is the increase in property value, enhancing investment returns over time.
Rent Vs Buy
Evaluate whether renting or buying a home is better for your finances and lifestyle.
Renting
Renting is leasing a property, allowing flexibility without long-term commitment and upfront costs like a mortgage.
Special Assessment
An extra fee charged by an HOA or condo board for major repairs or improvements not covered by regular HOA dues.
Underwriting
The process where lenders evaluate your creditworthiness and determine if they'll approve your loan and at what terms.
VA Loan
A zero-down-payment mortgage guaranteed by the Department of Veterans Affairs for eligible military service members, veterans, and surviving spouses.
Insurance
Homeowners Insurance
Protects your home and belongings from damage or loss, providing peace of mind and financial security.
Life Insurance
Life insurance protects your loved ones financially after you pass away, ensuring their needs are met.
Long Term Care Insurance
Protects your savings by covering costs of extended care services, vital for aging adults.
Premium
The regular payment you make to maintain your insurance coverage.
Rate Increase
An increase in insurance premiums after filing a claim or other risk factors change.
Universal Life Insurance
A flexible life insurance that combines coverage with a cash value component for long-term savings.
Insurance & Healthcare
Insurance & Risk Management
Claim Frequency
How often you file insurance claims, measured as claims per year (e.g., 0.2 = 1 claim every 5 years).
Claim Severity
The average dollar amount paid out per insurance claim, indicating the size/cost of losses.
Collision Coverage
Auto insurance that covers damage to your vehicle from crashes with other cars or objects, regardless of who's at fault.
Comprehensive Coverage
Auto insurance that covers damage to your vehicle from non-collision events like theft, vandalism, weather, or animal strikes.
Insurance Premium
The amount you pay (monthly, quarterly, or annually) to maintain active insurance coverage.
Pet Insurance
Insurance coverage for veterinary expenses and pet health care, ranging from routine visits to emergency surgery.
Risk Management
The process of identifying, assessing, and controlling threats to your financial security and goals.
Risk Tolerance
Your willingness and financial ability to absorb potential losses or uncertainty in exchange for potential rewards.
Investing & Growth
Investing Basics
Investment
12b-1 Fee
Hidden mutual fund fee (0.25-1% annually) for marketing and distribution. Comes out of your returns. Avoid funds with high 12b-1 fees.
AUM (Assets Under Management)
Total market value of investments managed by an advisor or fund. Used to calculate 1% annual advisor fees—$500K AUM = $5K/year.
Alpha
Excess return above benchmark. Positive alpha = beat the market. Most actively managed funds have negative alpha after fees.
Bear Market
20%+ sustained market decline from recent peak. Characterized by fear, pessimism, and falling prices. Buying opportunity for long-term investors.
Beta
Volatility compared to market. Beta of 1.0 = moves with market. Beta of 1.5 = 50% more volatile. Measures risk, not return.
Bull Market
20%+ sustained market rise from recent low. Characterized by optimism, economic growth, and rising prices. Opposite of bear market.
Corporate Bond
A corporate bond is a debt security issued by companies, offering investors fixed returns and portfolio diversification.
Dividend Payout Ratio
The dividend payout ratio shows what portion of earnings is paid to shareholders, helping assess a company's profitability and growth potential.
Dividend Reinvestment
Automatically reinvest dividends to buy more shares, enhancing your investment growth over time.
Dividend Yield
Annual dividend payment divided by stock price. 3% yield on $100 stock = $3 yearly dividend. Measure of income return.
Fee-Only Advisor
Financial advisor paid only by client fees, not commissions. Fiduciary duty to act in your best interest. No conflicts from product sales.
Junk Bond
High-risk, high-yield bonds that can boost investment returns but carry a higher chance of default.
Load (Mutual Fund)
Sales commission charged when buying (front-load) or selling (back-load) a mutual fund. Avoid—buy no-load index funds instead.
Long Term Capital Gains
Profits from assets held over a year, taxed at lower rates, maximizing your investment returns.
Municipal Bond
A municipal bond is a debt security issued by local governments, offering tax-free interest to investors.
P/E Ratio (Price-to-Earnings)
Stock price divided by annual earnings per share. Shows how much you pay per $1 of earnings. Low P/E may be cheap, high may be overvalued.
Sharpe Ratio
Risk-adjusted return measure. Higher is better. 1.0+ is good. Compares excess return to volatility—rewards returns, penalizes risk.
Short Term Capital Gains
Profits from assets held for one year or less, taxed at ordinary income rates, impacting your overall tax bill.
Stock
Stocks are shares in a company, offering potential growth and dividends to investors.
Treasury Bond
A Treasury bond is a long-term government debt security that offers stable interest and low risk.
Turnover Ratio
Percentage of fund holdings sold and replaced each year. 100% = entire portfolio traded. High turnover = higher taxes and costs.
Investment Analysis
Appreciation
The increase in an asset's value over time, whether it's real estate, stocks, or other investments.
Asset Class
A group of investments with similar behavior, risk, and regulatory profiles (e.g., stocks, bonds, cash).
Bond
A fixed-income investment where you loan money to a government or corporation in exchange for regular interest payments.
Bond Yield
The return an investor earns on a bond, expressed as a percentage, which can be calculated as current yield (annual interest Ă· current price) or yield to maturity (total return if held until maturity).
Capital Gains Tax
Tax on profits from selling investments like stocks, bonds, or real estate.
Capital Loss
A loss realized when you sell an investment for less than you paid for it, which can offset capital gains for tax purposes.
Correlation
A value between -1 and +1 that shows how two investments move together—lower correlation improves diversification.
Cost Basis
The original purchase price of an investment, used to calculate capital gains or losses when you sell.
Currency Risk
The risk that exchange rate fluctuations will negatively affect the value of your international investments or transactions.
DRIP (Dividend Reinvestment Plan)
An investment program that automatically uses dividend payments to purchase additional shares of stock.
Diversification
Spreading investments across different asset classes to reduce risk—the 'don't put all your eggs in one basket' principle.
Dividend
A payment made by a corporation to its shareholders, usually as a distribution of profits.
Dollar-Cost Averaging (DCA)
An investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions.
ESG (Environmental, Social, and Governance)
Investment criteria that evaluate companies based on environmental impact, social responsibility, and ethical governance practices.
ETF (Exchange-Traded Fund)
A basket of stocks or bonds that trades like a single stock, offering instant diversification with low fees.
ETF Overlap
When multiple ETFs or funds in your portfolio hold the same stocks, creating unintended concentration risk.
Ex-Dividend Date
The cutoff date to own a stock to receive its upcoming dividend payment—buy before this date to get the dividend.
Expense Ratio
The annual fee charged by mutual funds and ETFs, expressed as a percentage of your investment.
Fractional Shares
Ownership of less than one full share of stock, allowing investors to buy portions of expensive stocks.
Future Value (FV)
The projected value of an investment or sum of money at a specific point in the future, accounting for compound growth.
Index Fund
A type of mutual fund or ETF that tracks a market index, providing broad market exposure with low costs.
Market Capitalization (Market Cap)
The total value of a company's outstanding shares, calculated by multiplying share price by the number of shares.
Market Risk
The risk of losses caused by overall market declines that you cannot diversify away.
Mutual Fund
A professionally managed investment pool that combines money from many investors to buy stocks, bonds, or other securities.
Payback Period
The time it takes for an investment to generate enough cash flow to recover its initial cost.
Portfolio Drift
When your actual asset allocation strays from the target mix because some investments outperform others.
Portfolio Optimization
Using math (like Modern Portfolio Theory) to find the mix of assets that maximizes return for a given level of risk.
Portfolio Rebalancing
The process of buying and selling assets to realign your portfolio with its target allocation.
Portfolio Rebalancing
The process of realigning your investment portfolio back to your target asset allocation by buying and selling assets.
Qualified Dividend
Dividends that meet IRS criteria and are taxed at the lower capital gains rate instead of ordinary income rates.
ROI (Return on Investment)
A metric that measures the profitability of an investment by comparing the gain or loss to its cost, expressed as a percentage.
Real Return
Investment returns adjusted for inflation, showing the actual increase in purchasing power.
Rebalancing Bands
Pre-set thresholds that tell you when an asset class has drifted enough to trigger a rebalance.
Reverse Stock Split
A corporate action that reduces the number of shares outstanding by combining multiple shares into one, proportionally increasing the price per share.
Stock Split
A corporate action that increases the number of shares outstanding by dividing each existing share into multiple shares, proportionally reducing the price per share.
Stress Testing
Simulating extreme market scenarios to see how your portfolio would behave during crashes, recessions, or rate spikes.
Tax-Efficient Rebalancing
Rebalancing strategies that minimize capital gains taxes by using smart trade sequencing.
Tax-Loss Harvesting
Selling investments at a loss to offset capital gains or up to $3,000 of ordinary income each year.
Volatility
How much an investment's price or returns bounce around over time—higher volatility means larger swings and higher risk.
Wash Sale Rule
An IRS rule that disallows claiming a capital loss if you buy the same or substantially identical security within 30 days before or after the sale.
Yield
The income return on an investment, expressed as a percentage of the investment's cost or current market value.
Investment Concepts
Investment Strategy
Personal Finance
20/4/10 Rule
A conservative car buying guideline: 20% down payment, 4-year maximum loan, monthly payment ≤10% of gross income.
50/30/20 Rule
A budgeting guideline allocating 50% to needs, 30% to wants, and 20% to savings
Analysis Paralysis
Overthinking choices until you miss the window to act.
Automated Savings
Setting up automatic transfers so saving happens without willpower.
Behavioral Finance
The study of how emotions and mental shortcuts influence money decisions.
Budget
A spending plan that tracks income and expenses to ensure you're living within your means and working toward financial goals.
Budget Planning
Process of creating a plan to spend your money on priorities, including fixed expenses like pet care.
Budget Variance
The difference between planned and actual spending
Cash Flow
The net amount of money moving in and out of your accounts
Cost Per Use
The total cost of an item divided by how many times you use it, revealing the true value of purchases.
Debt-to-Asset Ratio
The percentage of your assets that are financed by debt
Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes toward debt payments
Delayed Gratification
Choosing to wait for a larger future reward instead of taking a smaller reward right now.
Discount
A reduction in price from the original or list price, typically expressed as a percentage or dollar amount.
Discretionary Spending
Non-essential expenses that can be reduced or eliminated, such as entertainment, dining out, and luxury items.
Emergency Fund
Savings buffer of 3-6 months of expenses for unexpected costs and financial security.
Emergency Fund
Savings buffer of 3-6 months of expenses for unexpected costs, including pet emergencies and medical crises.
Equivalized Income
Household income adjusted for the number of adults and children, recognizing that larger households share costs and don't need proportionally more money.
Expense Tracking
Systematically recording every expense so you know exactly where your money goes.
Financial Discipline
Consistently making money choices that align with your long-term goals—even when it’s difficult.
Financial Independence
Achieving financial independence means having enough income to cover your expenses without relying on a paycheck.
Financial Literacy
Understanding financial concepts helps you make informed money decisions, leading to better financial health.
Frugality
Frugality is the practice of mindful spending to save money and achieve financial goals.
Gratuity (Tip)
A voluntary payment given to service workers in addition to the bill amount, typically based on quality of service.
Hidden Expenses
Small or automatic charges that slip under the radar but add up over time.
Impulse Spending
Unplanned purchases driven by emotion, convenience, or social pressure rather than real need.
Income Percentile
Your ranking compared to all earners—50th percentile means you earn more than 50% of people.
Lifestyle Inflation
The tendency to increase spending as income rises, often preventing wealth building.
Lifetime Value
Total value derived from an investment, relationship, or asset over its entire lifespan.
Liquid Assets
Assets that can be quickly converted to cash without losing value—like savings accounts, stocks, and money market funds.
Liquidity
How quickly an asset can be converted to cash without significant loss of value
Net Worth
Total assets minus total liabilities—the true measure of your financial health
Net Worth Percentile
Your net worth rank using 2022 Federal Reserve Survey of Consumer Finances percentiles, showing what share of your age group has less wealth.
Opportunity Cost
The value of the next best alternative you give up when making a choice.
Percentage
A fraction or ratio expressed as a number out of 100, denoted by the % symbol.
Sales Tax
A consumption tax imposed by governments on the sale of goods and services, typically calculated as a percentage of the purchase price.
Savings Rate
The savings rate is the percentage of income saved, crucial for building wealth and achieving financial goals.
Service Charge
A mandatory fee added to a bill for service, separate from and in addition to sales tax.
Tip
A voluntary payment to service workers, typically a percentage of the bill, given as thanks for good service.
Total Cost of Ownership (TCO)
The complete cost of owning something over its lifetime, including purchase price, maintenance, insurance, fuel, repairs, and eventual resale value.
Total Cost of Ownership (TCO)
The complete cost of owning something over its entire lifetime, including all purchase, maintenance, and operational expenses.
Wealth
Wealth is the accumulation of valuable resources, crucial for financial security and growth.
Wealth Building
The process of systematically increasing your net worth over time
Zero Based Budgeting
A budgeting method where every dollar is allocated, ensuring expenses match income for better control.
Zero-Based Budget
A budgeting method where every dollar of income is assigned a specific purpose
Policy & Economics
Carbon Dividend
A policy that rebates carbon-tax revenue equally to households so most people receive more back than they pay.
Carbon Footprint
The total greenhouse gas emissions caused by an individual, organization, or product, measured in CO2 equivalents.
Carbon Offset
A reduction in greenhouse gas emissions or increase in carbon storage to compensate for emissions made elsewhere.
Carbon Tax
A government policy that charges emitters a fee for each ton of carbon dioxide they release into the atmosphere.
Electric Vehicle (EV)
A vehicle powered by an electric motor and battery pack instead of an internal combustion engine.
Energy Efficiency
Using less energy to perform the same tasks, reducing energy waste and costs.
Greenhouse Gas
Gases in Earth's atmosphere that trap heat and contribute to global warming, including carbon dioxide, methane, and nitrous oxide.
Net Metering
A billing system that credits solar panel owners for excess electricity they generate and send back to the grid.
Renewable Energy
Energy from sources that naturally replenish themselves and don't run out, such as solar, wind, and hydroelectric power.
Revenue Recycling
How governments use carbon-tax revenue—through dividends, tax cuts, or clean-energy investments—to soften economic impacts.
Solar Panels
Photovoltaic systems that convert sunlight into electricity for residential and commercial use.
Sustainable Living
A lifestyle that reduces environmental impact through conscious choices about energy use, transportation, consumption, and waste.
Real Estate
Closing Costs
Fees to finalize home purchase—2-5% of home price. Includes appraisal, title insurance, attorney, origination, taxes. Plan $10K on $300K home.
Earnest Money
Good faith deposit (1-3% of home price) when making offer. Shows seller you're serious. Returned if deal falls through, applied to closing if successful.
Home Equity
The portion of your home's value that you actually own (market value minus mortgage balance)
Real Estate & Mortgages
Retirement
403(b) Plan
A 403(b) plan is a retirement savings option for eligible employees of public schools and tax-exempt organizations, offering tax benefits.
Annuity
An annuity is a financial product that provides regular payments over time, crucial for retirement income planning.
Backdoor Roth Ira
A strategy to contribute to a Roth IRA despite income limits, enabling tax-free growth.
Barista FIRE
Barista FIRE lets you work part-time while living off investments, balancing freedom and income.
Catch-Up Contribution
Extra retirement contributions allowed at age 50+. 401k: additional $7,500/year. IRA: additional $1,000/year. Helps late savers close gap.
Coast FIRE
Coast FIRE lets you stop saving for retirement early, while your investments grow to fund your future.
Deferred Annuity
A deferred annuity is a retirement savings plan that grows tax-deferred until withdrawals begin, helping you save for the future.
Expiration Date
The expiration date is the last day you can act on an investment or financial product, affecting its value.
FIRE Movement (Financial Independence, Retire Early)
The FIRE Movement enables individuals to retire early by saving aggressively and investing wisely for financial independence.
Fat FIRE
Fat FIRE allows for a luxurious retirement by saving significantly more than traditional methods, ensuring financial freedom.
Fixed Annuity
A fixed annuity provides guaranteed payments, offering stability and predictability for retirement income.
Full Retirement Age
The age you can claim full Social Security benefits, impacting your retirement income.
Glide Path
Automatic asset allocation shift in target-date funds from aggressive (stocks) to conservative (bonds) as retirement approaches. "Set and forget" strategy.
Immediate Annuity
A financial product that provides guaranteed income immediately for a set period or lifetime, ensuring financial stability.
Lean FIRE
Lean FIRE is an early retirement strategy requiring lower expenses to retire sooner and enjoy financial freedom.
Pension
A pension is a retirement plan that provides regular payments, ensuring financial security in your later years.
Retirement
Retirement is the planned cessation of work, allowing you to enjoy life without financial stress.
Retirement Age
The age you can start receiving retirement benefits, impacting your financial planning and savings needs.
Simple Ira
A SIMPLE IRA helps small businesses and their employees save for retirement easily and tax-efficiently.
Social Security
A federal program providing financial support during retirement, disability, or death, crucial for income stability.
Social Security Benefits
Monthly payments from the government that help retirees and disabled individuals financially.
Variable Annuity
A variable annuity is a retirement product offering investment options with potential for growth and income flexibility.
Retirement Planning
401(k)
An employer-sponsored retirement account where you contribute pre-tax income, often with employer matching.
Backdoor Roth IRA
A legal strategy allowing high earners to contribute to a Roth IRA by converting a Traditional IRA contribution.
Employer Match
Free money from your employer when you contribute to a 401(k) or similar retirement plan, typically matching 3-6% of your salary.
FIRE (Financial Independence, Retire Early)
A movement focused on saving aggressively (50-70% of income) to retire decades earlier than traditional retirement age.
Pre-Tax (Before Tax)
Income or contributions made before taxes are withheld, reducing current taxable income.
QCD (Qualified Charitable Distribution)
A tax-free donation of up to $105,000 per year directly from your IRA to charity, available to those age 70½ and older, that counts toward your RMD.
RMD (Required Minimum Distribution)
The minimum amount you must withdraw from retirement accounts annually starting at age 73, whether you need the money or not.
Roth Conversion (Roth IRA Conversion)
The process of moving money from a traditional IRA or 401(k) to a Roth IRA by paying taxes on the converted amount now in exchange for tax-free growth and withdrawals later.
Roth IRA
A retirement account funded with after-tax dollars that grows tax-free, with tax-free withdrawals in retirement.
SEP IRA (Simplified Employee Pension)
A retirement account for self-employed individuals and small business owners allowing contributions up to 25% of income or $69,000 (2024).
Safe Withdrawal Rate (4% Rule)
The percentage of your retirement portfolio you can withdraw annually without running out of money, historically around 4%.
Sequence of Returns Risk
The risk that poor investment returns early in retirement can permanently damage your portfolio, even if long-term averages are good.
Target Date Fund
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as you approach your target retirement date.
Traditional IRA
A retirement account with tax-deductible contributions that grow tax-deferred until withdrawal in retirement.
Security & Privacy
Small Business
Equipment Collateral
Using purchased equipment as security for a loan, making it easier to get approved and often at better rates.
Maintenance Reserve
A fund set aside specifically for equipment maintenance and repairs to prevent unexpected financial strain.
Section 179
A tax deduction that allows businesses to deduct the full cost of qualifying equipment in the year it's purchased.
Student Loans
Income Driven Repayment (IDR)
Federal student loan repayment plans that cap monthly payments at a percentage of your discretionary income, with potential loan forgiveness after 20-25 years.
SAVE Plan
The newest and most generous federal student loan repayment plan, offering 5-10% payments and interest subsidies for eligible borrowers.
Tax Planning
Capital Gains
Profits realized from selling investments like stocks, bonds, or real estate for more than their cost basis.
Cost Basis (Crypto)
The original purchase price of cryptocurrency plus fees, used to calculate capital gains or losses.
FBAR (Foreign Bank Account Report)
FinCEN Form 114 requiring U.S. persons to report foreign financial accounts exceeding $10,000 aggregate value.
FIFO (First In, First Out)
Accounting method where the oldest assets are sold first—the IRS default for cryptocurrency.
Form 8949
IRS form used to report sales and dispositions of capital assets, including cryptocurrency.
HIFO (Highest In, First Out)
Tax optimization strategy where you sell the highest-cost assets first to minimize capital gains.
Tax Credit
A dollar-for-dollar reduction in tax liability, providing direct savings on taxes owed.
Wash Sale Rule
Tax rule that disallows loss deductions if you repurchase the same or substantially identical security within 30 days.
Taxes
Active Income
Active income is earnings from work, crucial for meeting immediate expenses and building wealth.
Discretionary Income
Discretionary income is the money left after essential expenses, crucial for saving and investing.
Earned Income
Earned income is money received from working, crucial for tax calculations and financial stability.
Effective Tax Rate
Your actual tax rate—total taxes paid divided by total income. Lower than marginal rate because of brackets and deductions.
Estate Tax
A tax on the transfer of assets after death, impacting wealth distribution and inheritance.
Estimated Taxes
Estimated taxes are prepayments of income tax owed, helping you avoid penalties and manage cash flow.
Generation Skipping Transfer Tax
A tax on transfers to beneficiaries two or more generations below you, preventing tax avoidance.
Gift Tax
A tax on gifts exceeding a certain value, ensuring fair taxation on wealth transfer.
Home Office Deduction
A tax break for home-based businesses to deduct expenses, saving you money.
IRS (Internal Revenue Service)
The IRS collects taxes and enforces tax laws, crucial for funding government services.
Income
Income is the money you earn, essential for budgeting and financial planning.
Income Statement
An income statement shows a company's revenues and expenses, helping assess financial performance over time.
Itemized Deductions
List of specific deductions (mortgage interest, charity, medical, taxes) that can exceed standard deduction and lower taxable income.
Medicare Tax
A payroll tax funding Medicare, crucial for health coverage for seniors and certain disabled individuals.
Ordinary Income
Income taxed at regular rates—wages, salary, interest, short-term capital gains. Taxed higher than qualified dividends and long-term capital gains.
Passive Income
Earnings from investments or side ventures that require little ongoing effort, crucial for financial freedom.
Payroll Taxes
Payroll taxes fund social programs and are crucial for employee benefits like Social Security and Medicare.
Progressive Tax System
A tax system where higher incomes are taxed at higher rates, promoting fairness and funding public services.
Property Taxes
Property taxes are mandatory fees on real estate, funding local services like schools and infrastructure.
Self Employment Tax
A tax on net earnings from self-employment that funds Social Security and Medicare.
Social Security Tax
A payroll tax that funds Social Security benefits, essential for retirement income.
Tax Advantaged Account
A tax-advantaged account helps you save or invest money with tax benefits, maximizing your earnings.
Tax Audit
A tax audit is a review of your financial records by the IRS to ensure accurate tax reporting and compliance.
Tax Deduction
A tax deduction reduces your taxable income, lowering your tax bill and increasing your potential refund.
Tax Refund
A tax refund is money returned to you by the government when you've overpaid your taxes, providing extra cash flow.
Taxable Account
A taxable account holds investments that incur taxes on gains, providing flexibility for withdrawals and strategies.
Taxable Income
Income that's actually taxed after subtracting deductions from AGI. Used to determine tax bracket and total tax owed.
Unearned Income
Income from sources other than employment, impacting taxes and financial planning.
Transportation
Vehicle Finance
Depreciation
The decrease in value of an asset over time due to wear, age, or market conditions.
Down Payment
The initial cash payment made when purchasing a vehicle, reducing the amount you need to finance.
GVWR (Gross Vehicle Weight Rating)
The maximum total weight a vehicle can safely carry, including the vehicle itself, passengers, cargo, and fuel.
budgeting
financing
retirement
tax
All Terms A-Z
A
Accounting
Accounting tracks financial activity, helping businesses make informed decisions and ensure compliance.
Accounts Payable
Accounts payable are short-term liabilities that a business owes to suppliers for goods or services received.
Accounts Receivable
Accounts receivable is money owed to a business, crucial for cash flow management.
Accrual Accounting
Accrual accounting records revenues and expenses when they are earned or incurred, enhancing financial clarity and insight.
Active Income
Active income is earnings from work, crucial for meeting immediate expenses and building wealth.
Active Investing
Active investing is a strategy aimed at outperforming market averages through frequent trading and analysis.
Adjustable Rate Mortgage
An Adjustable Rate Mortgage (ARM) offers lower initial rates that can change over time, making homeownership more affordable.
ADLs (Activities of Daily Living)
Six basic self-care tasks—like bathing and dressing—that determine long-term care eligibility.
Advance Directive
A legal document outlining your healthcare preferences, ensuring your wishes are honored when you can't voice them.
After-Tax Income
Your take-home pay after federal, state, and payroll taxes are deducted—the actual money you can spend.
AGI (Adjusted Gross Income)
Your total gross income minus specific deductions, used to determine tax liability and eligibility for credits.
Alpha
Excess return above benchmark. Positive alpha = beat the market. Most actively managed funds have negative alpha after fees.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Analysis Paralysis
Overthinking choices until you miss the window to act.
Annual Fee
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
Annuity
An annuity is a financial product that provides regular payments over time, crucial for retirement income planning.
Annuity Payment
Regular periodic payment from an annuity contract
Any Occupation
Disability coverage that only pays benefits if you cannot work in any reasonable job based on your experience and education.
Appreciation
The increase in an asset's value over time, whether it's real estate, stocks, or other investments.
APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
APR vs Interest Rate
APR reflects total borrowing costs; interest rate only shows the cost of borrowing money.
APY (Annual Percentage Yield)
The effective annual rate of return on savings, accounting for compound interest.
Asset
An asset is anything of value owned by an individual or entity, crucial for building wealth and financial security.
Asset Allocation
The mix of different investment types in your portfolio, determining both risk and potential returns
Asset Class
A group of investments with similar behavior, risk, and regulatory profiles (e.g., stocks, bonds, cash).
Assisted Living
Housing for people who need help with daily tasks but not round-the-clock medical care.
Audit
An audit is a systematic review of financial records to ensure accuracy and compliance, helping to avoid costly mistakes.
AUM (Assets Under Management)
Total market value of investments managed by an advisor or fund. Used to calculate 1% annual advisor fees—$500K AUM = $5K/year.
AUM Fee (Assets Under Management Fee)
AUM fees are charges based on the total assets managed, impacting investment returns.
Automated Savings
Setting up automatic transfers so saving happens without willpower.
B
Back End Load
A back end load is a fee charged when selling mutual fund shares, impacting your investment returns.
Backdoor Roth Ira
A strategy to contribute to a Roth IRA despite income limits, enabling tax-free growth.
Backdoor Roth IRA
A legal strategy allowing high earners to contribute to a Roth IRA by converting a Traditional IRA contribution.
Balance Sheet
A balance sheet shows what you own and owe, helping assess financial health and make informed decisions.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.
Balloon Payment
A large lump-sum payment due at the end of some loans after a period of smaller monthly payments.
Bankruptcy
Bankruptcy is a legal process that helps individuals or businesses eliminate or repay debts, providing a fresh start.
Barista FIRE
Barista FIRE lets you work part-time while living off investments, balancing freedom and income.
Bear Market
20%+ sustained market decline from recent peak. Characterized by fear, pessimism, and falling prices. Buying opportunity for long-term investors.
Behavioral Finance
The study of how emotions and mental shortcuts influence money decisions.
Beneficiary
The person, trust, or organization that receives the life insurance payout.
Benefit Period
How long your disability insurance will pay benefits once a qualifying claim is approved.
Beta
Volatility compared to market. Beta of 1.0 = moves with market. Beta of 1.5 = 50% more volatile. Measures risk, not return.
Bitcoin
Bitcoin is a decentralized digital currency that empowers users with financial autonomy and investment potential.
Blockchain
A decentralized digital ledger that enhances transparency and security in transactions.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Bond
A fixed-income investment where you loan money to a government or corporation in exchange for regular interest payments.
Bond Yield
The return an investor earns on a bond, expressed as a percentage, which can be calculated as current yield (annual interest Ă· current price) or yield to maturity (total return if held until maturity).
Book Value
Book value is the net asset value of a company, helping investors assess its worth and potential profitability.
Bookkeeping
Bookkeeping tracks your financial transactions, ensuring accuracy and facilitating informed decisions.
Break Even Point
The break even point is where total revenues equal total costs, helping you assess profitability.
Break-Even Analysis
A calculation that determines the point at which total revenue equals total costs, showing how many units must be sold or how much revenue is needed before a business becomes profitable.
Brokerage Account
A brokerage account lets you buy and sell investments, helping you grow wealth over time.
Budget
A spending plan that tracks income and expenses to ensure you're living within your means and working toward financial goals.
Budget Planning
Process of creating a plan to spend your money on priorities, including fixed expenses like pet care.
Budget Variance
The difference between planned and actual spending
Bull Market
20%+ sustained market rise from recent low. Characterized by optimism, economic growth, and rising prices. Opposite of bear market.
Business Expenses
Costs incurred in running a business that can reduce taxable income and improve cash flow.
Buy And Hold
A long-term investment strategy focusing on buying stocks and holding them for years to capitalize on growth.
C
C-Corporation
A C-Corporation is a legal entity that protects owners' personal assets while allowing for unlimited growth potential.
CAC (Customer Acquisition Cost)
The total cost of acquiring a new customer, including marketing and sales expenses.
Call Option
A call option gives you the right to buy an asset at a set price, allowing profit from price increases.
Capital Gains
Profits realized from selling investments like stocks, bonds, or real estate for more than their cost basis.
Capital Gains Tax
Tax on profits from selling investments like stocks, bonds, or real estate.
Capital Loss
A loss realized when you sell an investment for less than you paid for it, which can offset capital gains for tax purposes.
Carbon Dividend
A policy that rebates carbon-tax revenue equally to households so most people receive more back than they pay.
Carbon Footprint
The total greenhouse gas emissions caused by an individual, organization, or product, measured in CO2 equivalents.
Carbon Offset
A reduction in greenhouse gas emissions or increase in carbon storage to compensate for emissions made elsewhere.
Carbon Tax
A government policy that charges emitters a fee for each ton of carbon dioxide they release into the atmosphere.
Cash Back
A credit card reward that returns a percentage of your spending as cash, typically 1-5% depending on the category.
Cash Basis Accounting
A simple accounting method that records revenue and expenses when cash changes hands, enhancing clarity in financial management.
Cash Flow
The net amount of money moving in and out of your accounts
Cash Flow Statement
A cash flow statement tracks cash inflows and outflows, helping you manage finances effectively.
Cash Value
The savings component inside certain permanent life insurance policies.
Cashback Rewards
Percentage of purchases returned as cash or credit
Catch Up Contributions
Extra savings allowed for those 50+ to boost retirement funds and secure financial future.
Catch-Up Contribution
Extra retirement contributions allowed at age 50+. 401k: additional $7,500/year. IRA: additional $1,000/year. Helps late savers close gap.
CCPA (California Consumer Privacy Act)
The CCPA enhances privacy rights for Californians, empowering them to control personal data usage.
CD Ladder
A savings strategy where you divide money across multiple CDs with different maturity dates to balance higher rates with liquidity.
Chapter 11 Bankruptcy
A legal process allowing businesses to reorganize debts while continuing operations, crucial for financial recovery.
Chapter 13 Bankruptcy
A repayment plan that helps individuals manage debt and keep assets while avoiding foreclosure.
Chapter 7 Bankruptcy
A legal way to eliminate most debts, allowing a fresh financial start.
Charitable Deduction
Tax deduction for donations to qualified organizations
Child and Dependent Care Tax Credit
Tax credit for childcare expenses while you work, worth up to $2,100 for two or more children (up to 35% of $6,000 in expenses).
Child Tax Credit
Federal tax credit of up to $2,000 per qualifying child under 17, reducing your tax bill dollar-for-dollar.
Claim Frequency
How often you file insurance claims, measured as claims per year (e.g., 0.2 = 1 claim every 5 years).
Claim Severity
The average dollar amount paid out per insurance claim, indicating the size/cost of losses.
Closing Costs
Fees to finalize home purchase—2-5% of home price. Includes appraisal, title insurance, attorney, origination, taxes. Plan $10K on $300K home.
Coast FIRE
Coast FIRE lets you stop saving for retirement early, while your investments grow to fund your future.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
COBRA allows you to continue health insurance coverage after job loss, crucial for financial stability.
Coinsurance
Percentage of medical costs you pay after meeting deductible. 20% coinsurance on $1,000 bill = you pay $200, insurance pays $800.
Collateral
Collateral is an asset pledged as security for a loan, reducing lender risk and enabling easier borrowing.
Collision Coverage
Auto insurance that covers damage to your vehicle from crashes with other cars or objects, regardless of who's at fault.
Commission Based Advisor
A commission-based advisor earns fees from product sales, impacting your investment costs and choices.
Compliance
Compliance ensures businesses follow laws, reducing risks and enhancing trust.
Compound Interest
Interest calculated on both principal and accumulated interest, creating exponential growth over time.
Compounding
Compounding is earning interest on interest, maximizing your investment growth over time.
Comprehensive Coverage
Auto insurance that covers damage to your vehicle from non-collision events like theft, vandalism, weather, or animal strikes.
Consumer Protection
Consumer protection safeguards buyers against unfair practices, ensuring fair treatment and product safety.
Contribution Limit
A contribution limit is the maximum amount you can legally invest in a financial account, helping you save effectively.
Contribution Margin
The amount each unit sold contributes toward covering fixed costs and generating profit.
Copay (Copayment)
Fixed dollar amount paid for doctor visits, prescriptions, or services. $30 specialist visit copay means you pay $30, insurance covers rest.
Corporate Bond
A corporate bond is a debt security issued by companies, offering investors fixed returns and portfolio diversification.
Correction
A market correction is a decline of 10% or more from a recent peak, signaling potential buying opportunities.
Correlation
A value between -1 and +1 that shows how two investments move together—lower correlation improves diversification.
Cosigner
A cosigner helps individuals secure loans by guaranteeing repayment, improving approval odds and terms.
Cost Basis
The original purchase price of an investment, used to calculate capital gains or losses when you sell.
Cost Basis (Crypto)
The original purchase price of cryptocurrency plus fees, used to calculate capital gains or losses.
Cost Of Goods Sold
COGS measures direct costs of producing goods sold, crucial for profit analysis.
Cost of Living
Amount needed to maintain a standard of living
Cost of Living Adjustment (COLA)
Regional variations in expenses that affect how much it costs to raise a child, with urban areas typically 20-50% more expensive than rural areas.
Cost Per Use
The total cost of an item divided by how many times you use it, revealing the true value of purchases.
Cpa
A CPA is a certified public accountant who can enhance your financial health through expert tax advice and planning.
CPI (Consumer Price Index)
A government measure of inflation that tracks the average change in prices consumers pay for goods and services over time.
Credit Card Debt
Credit card debt is money owed on credit cards, impacting finances and credit scores.
Credit Counseling
Credit counseling helps individuals manage debt and improve financial literacy for a stable financial future.
Credit Freeze
A credit freeze restricts access to your credit report, helping prevent identity theft.
Credit Monitoring
Credit monitoring tracks your credit report for changes, helping you spot fraud and improve your credit score.
Credit Rating
A credit rating assesses your creditworthiness, impacting loan terms and interest rates.
Credit Score
A credit score predicts your creditworthiness, influencing loan rates and approval chances.
Credit Utilization Ratio
The percentage of available credit you're using, calculated by dividing total credit card balances by total credit limits.
Cryptocurrency
Digital currencies that use cryptography for secure transactions and can offer investment opportunities.
Currency Risk
The risk that exchange rate fluctuations will negatively affect the value of your international investments or transactions.
Cybersecurity
Cybersecurity protects your digital assets from threats, ensuring safety and privacy online.
D
Daily Benefit Amount
The maximum your long-term care policy will pay per day for covered services.
Daily Interest
Daily interest is the amount of interest accrued each day on a principal balance, crucial for understanding loan costs.
Data Breach
A data breach is an incident where sensitive information is accessed illegally, risking financial loss and identity theft.
Death Benefit
The lump sum paid to beneficiaries when the insured person dies.
Debt Avalanche Method
A debt payoff strategy where you pay minimums on all debts, then put extra money toward the highest interest rate debt first.
Debt Consolidation
The process of combining multiple debts into a single loan with a lower interest rate to simplify payments and reduce costs.
Debt Management Plan
A structured program to pay off debt efficiently, helping you regain financial stability.
Debt Settlement
A negotiation process to reduce total debt owed, helping you save money and regain control of finances.
Debt Snowball Method
A debt payoff strategy where you pay minimums on all debts, then focus extra payments on the smallest balance first for psychological wins.
Debt-to-Asset Ratio
The percentage of your assets that are financed by debt
Debt-to-Income Ratio (DTI)
Percentage of gross monthly income that goes toward debt payments.
Debt-to-Income Ratio (DTI)
The percentage of your gross monthly income that goes toward debt payments
Deductible
The amount you must pay out-of-pocket before insurance coverage kicks in.
Deed In Lieu
A deed in lieu allows homeowners to transfer property to lenders to avoid foreclosure, preserving credit and reducing debt.
Default
Default is failing to meet loan obligations, impacting credit and future borrowing options.
Deferred Annuity
A deferred annuity is a retirement savings plan that grows tax-deferred until withdrawals begin, helping you save for the future.
Defined Benefit Plan
A retirement plan where employer guarantees a specific payout, ensuring financial security in retirement.
Defined Contribution Plan
A retirement plan where contributions are made by you and/or your employer, impacting your future savings.
Deflation
A general decrease in the price level of goods and services, the opposite of inflation.
Delayed Gratification
Choosing to wait for a larger future reward instead of taking a smaller reward right now.
Delayed Retirement Credits
Delaying retirement increases your benefit, boosting your monthly Social Security payments.
Dependent Care FSA
Pre-tax savings account for childcare expenses, allowing you to set aside up to $5,000/year tax-free to pay for daycare and after-school care.
Depreciation
The decrease in value of an asset over time due to wear, age, or market conditions.
Depreciation Business
Depreciation reduces asset value over time, impacting taxes and cash flow management.
Depression
A severe economic downturn impacting jobs, investments, and spending.
Derivatives
Derivatives are financial contracts that derive value from underlying assets, helping manage risk and enhance returns.
DIME Method
A rule of thumb for estimating life insurance needs: Debt, Income, Mortgage, Education.
Discount
A reduction in price from the original or list price, typically expressed as a percentage or dollar amount.
Discount Rate
The discount rate is the interest rate used to determine the present value of future cash flows, crucial for investment decisions.
Discretionary Income
Discretionary income is the money left after essential expenses, crucial for saving and investing.
Discretionary Spending
Non-essential expenses that can be reduced or eliminated, such as entertainment, dining out, and luxury items.
Diversification
Spreading investments across different asset classes to reduce risk—the 'don't put all your eggs in one basket' principle.
Dividend
A payment made by a corporation to its shareholders, usually as a distribution of profits.
Dividend Payout Ratio
The dividend payout ratio shows what portion of earnings is paid to shareholders, helping assess a company's profitability and growth potential.
Dividend Reinvestment
Automatically reinvest dividends to buy more shares, enhancing your investment growth over time.
Dividend Yield
Annual dividend payment divided by stock price. 3% yield on $100 stock = $3 yearly dividend. Measure of income return.
Dollar-Cost Averaging (DCA)
An investment strategy where you invest a fixed amount of money at regular intervals, regardless of market conditions.
Down Payment
The initial cash payment made when purchasing a vehicle, reducing the amount you need to finance.
DRIP (Dividend Reinvestment Plan)
An investment program that automatically uses dividend payments to purchase additional shares of stock.
DSCR (Debt Service Coverage Ratio)
A measure of cash flow available to pay debt obligations, calculated as annual net operating income divided by annual debt payments.
Dynamic Currency Conversion (DCC)
When merchants abroad offer to charge your card in your home currency instead of local currency, usually with hidden markup of 3-7%.
E
Early Withdrawal Penalty
Fee for withdrawing funds before maturity
Earned Income
Earned income is money received from working, crucial for tax calculations and financial stability.
Earned Income Tax Credit
A refundable tax credit that boosts income for low to moderate earners, making a real financial difference.
Earnest Money
Good faith deposit (1-3% of home price) when making offer. Shows seller you're serious. Returned if deal falls through, applied to closing if successful.
Earnings Per Share
Earnings Per Share (EPS) measures a company's profitability, indicating how much profit is allocated to each outstanding share.
EFC (Expected Family Contribution)
The amount of money your family is expected to contribute toward college costs for one year, calculated by the FAFSA formula.
Effective Tax Rate
Your actual tax rate—total taxes paid divided by total income. Lower than marginal rate because of brackets and deductions.
Electric Vehicle (EV)
A vehicle powered by an electric motor and battery pack instead of an internal combustion engine.
Elimination Period
The waiting period before disability insurance benefits start—think of it as a time-based deductible.
Emergency Fund
Savings buffer of 3-6 months of expenses for unexpected costs and financial security.
Emergency Fund
Savings buffer of 3-6 months of expenses for unexpected costs, including pet emergencies and medical crises.
Emergency Liquidity
Emergency liquidity is cash available for urgent needs, ensuring financial stability in crises.
Employer Match
Free money from your employer when you contribute to a 401(k) or similar retirement plan, typically matching 3-6% of your salary.
Encryption
Encryption is a security method that protects sensitive data, ensuring privacy and integrity in financial transactions.
Energy Efficiency
Using less energy to perform the same tasks, reducing energy waste and costs.
EPO (Exclusive Provider Organization)
An EPO limits coverage to a network of providers, often lowering costs for members.
Equal Credit Opportunity Act
A federal law ensuring fair access to credit for all consumers, regardless of background.
Equipment Collateral
Using purchased equipment as security for a loan, making it easier to get approved and often at better rates.
Equity
Equity represents ownership in an asset, crucial for wealth building and financial security.
Equivalized Income
Household income adjusted for the number of adults and children, recognizing that larger households share costs and don't need proportionally more money.
Escrow Account
A separate account where lenders hold funds for property taxes and insurance, ensuring these bills are paid on time.
ESG (Environmental, Social, and Governance)
Investment criteria that evaluate companies based on environmental impact, social responsibility, and ethical governance practices.
Estate Planning
Estate planning ensures your assets are distributed according to your wishes after death, minimizing taxes and family disputes.
Estate Tax
A tax on the transfer of assets after death, impacting wealth distribution and inheritance.
Estimated Taxes
Estimated taxes are prepayments of income tax owed, helping you avoid penalties and manage cash flow.
ETF (Exchange-Traded Fund)
A basket of stocks or bonds that trades like a single stock, offering instant diversification with low fees.
ETF Overlap
When multiple ETFs or funds in your portfolio hold the same stocks, creating unintended concentration risk.
Ethereum
Ethereum is a blockchain platform enabling decentralized apps, crucial for modern finance and digital assets.
Ex-Dividend Date
The cutoff date to own a stock to receive its upcoming dividend payment—buy before this date to get the dividend.
Exchange Crypto
Exchange crypto to trade digital currencies and maximize investment potential.
Exchange Rate
The value of one currency in terms of another—how many euros you get for a dollar, for example.
Executor
An executor manages your estate after you pass, ensuring your wishes are fulfilled and debts are settled.
Expense Ratio
The annual fee charged by mutual funds and ETFs, expressed as a percentage of your investment.
Expense Tracking
Systematically recording every expense so you know exactly where your money goes.
Expiration Date
The expiration date is the last day you can act on an investment or financial product, affecting its value.
Extra Payments (Loan Acceleration)
Additional principal payments beyond the required monthly amount that reduce total interest and shorten loan payoff time.
F
Fair Credit Reporting Act
This law ensures your credit report is accurate and fair, impacting loan access and rates.
Fair Debt Collection Practices Act
A law ensuring fair treatment of consumers by debt collectors, protecting against abusive practices.
Fair Value
Fair value is an asset's true worth in the market, crucial for informed investment decisions.
Fat FIRE
Fat FIRE allows for a luxurious retirement by saving significantly more than traditional methods, ensuring financial freedom.
FBAR (Foreign Bank Account Report)
FinCEN Form 114 requiring U.S. persons to report foreign financial accounts exceeding $10,000 aggregate value.
FDIC (Federal Deposit Insurance Corporation)
The FDIC insures deposits up to $250,000, protecting your savings from bank failures.
Fed Funds Rate
The Fed Funds Rate is the interest rate at which banks lend to each other overnight, influencing overall economic activity.
Federal Funds Rate
Interest rate banks charge each other for overnight loans. Set by Federal Reserve. Controls all other interest rates—mortgages, credit cards, savings.
Federal Reserve
The Federal Reserve controls U.S. monetary policy to stabilize the economy and influence inflation and employment.
Fee-Only Advisor
Financial advisor paid only by client fees, not commissions. Fiduciary duty to act in your best interest. No conflicts from product sales.
FHA Loan
A government-backed mortgage insured by the Federal Housing Administration, allowing low down payments (as low as 3.5%) and lower credit scores.
FICA (Federal Insurance Contributions Act)
Payroll taxes that fund Social Security and Medicare, totaling 7.65% of wages for employees (matched by employers).
FICO Score
A three-digit credit score (300-850) calculated by Fair Isaac Corporation, used by lenders to assess creditworthiness.
Fiduciary
A fiduciary is a trusted advisor required to act in your best financial interest.
FIFO (First In, First Out)
Accounting method where the oldest assets are sold first—the IRS default for cryptocurrency.
Financial Advisor
A financial advisor helps you manage investments and plan for financial goals, enhancing your financial well-being.
Financial Discipline
Consistently making money choices that align with your long-term goals—even when it’s difficult.
Financial Independence
Achieving financial independence means having enough income to cover your expenses without relying on a paycheck.
Financial Literacy
Understanding financial concepts helps you make informed money decisions, leading to better financial health.
Financial Planning
A strategic approach to managing finances, ensuring a secure future and achieving financial goals.
Financial Statements
Financial statements summarize a company's financial performance and position, crucial for informed decision-making.
FINRA (Financial Industry Regulatory Authority)
FINRA oversees brokers and ensures fair markets, protecting investors' interests.
FIRE (Financial Independence, Retire Early)
A movement focused on saving aggressively (50-70% of income) to retire decades earlier than traditional retirement age.
FIRE Movement (Financial Independence, Retire Early)
The FIRE Movement enables individuals to retire early by saving aggressively and investing wisely for financial independence.
Fixed Annuity
A fixed annuity provides guaranteed payments, offering stability and predictability for retirement income.
Fixed Expenses
Fixed expenses are regular, unchanging costs essential for living, helping you budget effectively.
Fixed Rate Mortgage
A fixed rate mortgage offers a stable interest rate, ensuring consistent monthly payments over the loan's lifespan.
Foreclosure
Foreclosure is a legal process where a lender reclaims property due to unpaid mortgage debt, impacting credit and homeownership.
Foreign Transaction Fee
A fee charged by credit card companies for transactions in foreign currencies, typically 1-3% of the purchase amount.
Form 1099
Form 1099 reports income from sources other than wages, aiding tax compliance.
Form 8949
IRS form used to report sales and dispositions of capital assets, including cryptocurrency.
Form W-4
Form W-4 helps you adjust your tax withholding to optimize your paycheck and tax refund.
Fractional Shares
Ownership of less than one full share of stock, allowing investors to buy portions of expensive stocks.
Fraud Alert
A fraud alert warns creditors to verify identity before granting credit, protecting against identity theft.
Freelancing
Freelancing offers flexibility and independence, allowing you to earn income on your own terms.
Front End Load
A front end load is a fee charged when you purchase shares in a mutual fund, impacting your investment's initial value.
Frugality
Frugality is the practice of mindful spending to save money and achieve financial goals.
FSA (Flexible Spending Account)
A pre-tax account for medical expenses that must be used within the plan year or you lose the money (use-it-or-lose-it rule).
Fuel Efficiency
Distance traveled per unit of fuel consumed
Full Retirement Age
The age you can claim full Social Security benefits, impacting your retirement income.
Future Value (FV)
The projected value of an investment or sum of money at a specific point in the future, accounting for compound growth.
Futures
Futures are contracts to buy or sell assets at predetermined prices, helping manage risk and speculate on price movements.
G
GDP (Gross Domestic Product)
GDP measures a country's economic performance and growth potential, directly impacting investment decisions.
GDPR (General Data Protection Regulation)
GDPR protects personal data in the EU, enhancing privacy rights and ensuring compliance for businesses.
Generation Skipping Transfer Tax
A tax on transfers to beneficiaries two or more generations below you, preventing tax avoidance.
Gift Tax
A tax on gifts exceeding a certain value, ensuring fair taxation on wealth transfer.
Gig Economy
A labor market with flexible, short-term jobs that boost income and autonomy.
Gini Coefficient
A measure of income inequality ranging from 0 (perfect equality) to 100 (one person has everything), showing how evenly or unevenly income is distributed.
Glide Path
Automatic asset allocation shift in target-date funds from aggressive (stocks) to conservative (bonds) as retirement approaches. "Set and forget" strategy.
Grace Period
Interest-free period (21-25 days) between purchase and payment due date. Only applies if you pay statement balance in full each month.
Gratuity (Tip)
A voluntary payment given to service workers in addition to the bill amount, typically based on quality of service.
Greenhouse Gas
Gases in Earth's atmosphere that trap heat and contribute to global warming, including carbon dioxide, methane, and nitrous oxide.
Gross Income
Your total income before any taxes or deductions are taken out—the starting point for tax calculations.
Gross Profit
Gross profit is revenue minus the cost of goods sold, reflecting a company's profitability on sales.
Guarantor
A guarantor is someone who agrees to pay a loan if the borrower defaults, enhancing loan approval chances.
GVWR (Gross Vehicle Weight Rating)
The maximum total weight a vehicle can safely carry, including the vehicle itself, passengers, cargo, and fuel.
H
HDHP (High Deductible Health Plan)
An HDHP is a health insurance plan with higher deductibles, offering lower premiums and potential tax benefits.
HDHP vs PPO
Two main types of health insurance plans: HDHP (high-deductible with HSA eligibility) vs PPO (preferred provider with higher premiums but lower deductibles).
Healthcare Costs
Healthcare costs refer to expenses for medical services, impacting budgets and financial planning.
Healthcare Proxy
A healthcare proxy designates someone to make medical decisions on your behalf when you're unable to do so.
HELOC (Home Equity Line of Credit)
A revolving credit line secured by your home equity, allowing you to borrow money as needed up to a preset limit.
Hidden Expenses
Small or automatic charges that slip under the radar but add up over time.
HIFO (Highest In, First Out)
Tax optimization strategy where you sell the highest-cost assets first to minimize capital gains.
High-Yield Savings Account
A savings account that pays significantly higher interest rates (typically 4-5% APY) than traditional bank accounts (0.01% APY), usually offered by online banks.
HMO (Health Maintenance Organization)
An HMO offers low-cost health insurance with a focus on preventive care and a network of providers.
Hoa Fees
HOA fees are monthly or yearly charges for community upkeep and amenities, enhancing property value.
Home Equity
The portion of your home's value that you actually own (market value minus mortgage balance)
Home Health Care
Skilled nursing or personal care delivered in your home by licensed professionals.
Home Office Deduction
A tax break for home-based businesses to deduct expenses, saving you money.
Homeowners Insurance
Protects your home and belongings from damage or loss, providing peace of mind and financial security.
House Hacking
House hacking allows you to reduce living costs by renting out part of your home.
HSA (Health Savings Account)
A tax-advantaged savings account for medical expenses, available only with high-deductible health plans.
Hyperinflation
Hyperinflation is a rapid, excessive price increase that erodes currency value, impacting savings and purchasing power.
I
IBR Plan (Income-Based Repayment)
An income-driven repayment plan requiring 10-15% of discretionary income with forgiveness after 20-25 years, ideal for borrowers whose debt exceeds their income.
ICR Plan (Income-Contingent Repayment)
The oldest income-driven plan with 20% discretionary income payments or a 12-year fixed amount, with forgiveness after 25 years—the only IDR option for Parent PLUS loans.
Identity Theft
Identity theft is when someone steals your personal information to commit fraud, impacting your finances and credit.
Illiquid Asset
An illiquid asset is hard to quickly sell for cash, affecting your financial flexibility.
Immediate Annuity
A financial product that provides guaranteed income immediately for a set period or lifetime, ensuring financial stability.
Impulse Spending
Unplanned purchases driven by emotion, convenience, or social pressure rather than real need.
In-Network
Doctors and hospitals contracted with your insurance for pre-negotiated rates. Lower costs, higher coverage. Always use in-network when possible.
Income
Income is the money you earn, essential for budgeting and financial planning.
Income Driven Repayment (IDR)
Federal student loan repayment plans that cap monthly payments at a percentage of your discretionary income, with potential loan forgiveness after 20-25 years.
Income Percentile
Your ranking compared to all earners—50th percentile means you earn more than 50% of people.
Income Replacement Ratio
The percentage of your paycheck a disability policy will replace while you are on claim.
Income Statement
An income statement shows a company's revenues and expenses, helping assess financial performance over time.
Index Fund
A type of mutual fund or ETF that tracks a market index, providing broad market exposure with low costs.
Inflation
General increase in prices over time, reducing the purchasing power of your money.
Inflation Protection
A rider that raises your long-term care benefit each year so it keeps up with rising costs.
Inheritance
Inheritance is assets passed to heirs, crucial for financial stability and legacy planning.
Insurance Premium
The amount you pay (monthly, quarterly, or annually) to maintain active insurance coverage.
Interest Rate
The cost of borrowing money or the return on savings, crucial for financial planning.
Interest Rates Economy
Interest rates influence borrowing costs, spending, and economic growth, affecting your finances significantly.
Intrinsic Value
Intrinsic value is the true worth of an asset, guiding investment decisions for better returns.
Inverted Yield Curve
Short-term bonds pay higher rates than long-term bonds. Recession predictor—has preceded every recession since 1950, usually by 12-24 months.
Investment Grade
Investment grade refers to bonds rated BBB- or higher, indicating lower risk and stable returns for investors.
Investment Property
An investment property generates rental income or capital appreciation, making it a key wealth-building asset.
Irrevocable Trust
An irrevocable trust protects assets from taxes and creditors, providing peace of mind and financial security.
IRS (Internal Revenue Service)
The IRS collects taxes and enforces tax laws, crucial for funding government services.
Itemized Deductions
List of specific deductions (mortgage interest, charity, medical, taxes) that can exceed standard deduction and lower taxable income.
J
L
Late Fee
Penalty for missing payment due date—up to $40 per occurrence. Also triggers penalty APR up to 29.99% and damages credit score.
Lean FIRE
Lean FIRE is an early retirement strategy requiring lower expenses to retire sooner and enjoy financial freedom.
Lease
Contractual agreement to use an asset for periodic payments
Lease Buyout
Purchasing a leased asset at end of lease term
Leverage
Leverage amplifies your investment potential by using borrowed funds, enhancing returns on your own capital.
Liability
A liability is a financial obligation that requires payment, impacting your net worth and cash flow.
LIBOR (London Interbank Offered Rate)
LIBOR is a benchmark interest rate that influences global borrowing costs and financial products.
Life Insurance
Life insurance protects your loved ones financially after you pass away, ensuring their needs are met.
Lifestyle Inflation
The tendency to increase spending as income rises, often preventing wealth building.
Lifetime Value
Total value derived from an investment, relationship, or asset over its entire lifespan.
Liquid Asset
Liquid assets are easily accessible funds, crucial for financial flexibility and emergency needs.
Liquid Assets
Assets that can be quickly converted to cash without losing value—like savings accounts, stocks, and money market funds.
Liquidity
How quickly an asset can be converted to cash without significant loss of value
Living Will
A living will specifies your medical preferences if you can't communicate, ensuring your wishes are honored.
LLC (Limited Liability Company)
An LLC protects your personal assets while offering tax flexibility and less paperwork than a corporation.
Load (Mutual Fund)
Sales commission charged when buying (front-load) or selling (back-load) a mutual fund. Avoid—buy no-load index funds instead.
Load Vs No Load
Load funds charge fees; no-load funds do not, impacting your investment returns.
Loan Term
The length of time you have to repay a loan, typically expressed in months or years.
Loan Term
The loan term is the duration for repaying a loan, impacting your monthly payments and total interest costs.
Long Term Capital Gains
Profits from assets held over a year, taxed at lower rates, maximizing your investment returns.
Long Term Care Insurance
Protects your savings by covering costs of extended care services, vital for aging adults.
Longevity Risk
The risk of outliving your savings, impacting retirement security.
LTV (Customer Lifetime Value)
The total revenue a business expects to earn from a customer over their entire relationship.
LTV (Loan-to-Value Ratio)
The percentage of the loan amount compared to the appraised value of the asset being purchased.
Lump Sum Investing
Investing a large sum of money at once for potential higher returns.
M
Maintenance Reserve
A fund set aside specifically for equipment maintenance and repairs to prevent unexpected financial strain.
Management Fee
A management fee compensates professionals for overseeing investments, impacting your overall returns.
Margin
Margin is borrowed money used to invest, allowing for greater potential returns but also higher risk.
Margin Call
A margin call occurs when your investment account falls below the required equity, prompting additional funds to avoid liquidation.
Marginal Tax Rate
The tax rate applied to your last dollar of income—the rate you pay on additional earnings.
Marine Survey
A professional inspection that evaluates a boat’s condition, value, and safety before purchase or financing.
Market Capitalization
Market capitalization measures a company's total value, guiding investment decisions.
Market Capitalization (Market Cap)
The total value of a company's outstanding shares, calculated by multiplying share price by the number of shares.
Market Correction
10-20% market decline from recent peak. Healthy and common—happens every 1-2 years. Not as severe as 20%+ bear market.
Market Risk
The risk of losses caused by overall market declines that you cannot diversify away.
Market Timing
The strategy of buying and selling investments based on predicted market movements to maximize returns.
Medicare
Medicare is a federal health insurance program for those 65+ and certain younger people, crucial for managing healthcare costs.
Medicare Advantage
Medicare Advantage is a private plan that covers Medicare benefits, often with extra perks.
Medicare Part A
Medicare Part A covers hospital care, making essential services affordable for seniors and eligible individuals.
Medicare Part B
Medicare Part B covers outpatient care, helping you save on doctor visits and preventive services.
Medicare Part D
Medicare Part D helps cover prescription drug costs for eligible individuals, reducing out-of-pocket expenses.
Medicare Tax
A payroll tax funding Medicare, crucial for health coverage for seniors and certain disabled individuals.
Medigap
Medigap supplements Medicare, covering out-of-pocket costs like copayments and deductibles.
Mega Backdoor Roth
A strategy allowing high earners to contribute up to $38,000 to a Roth IRA, boosting tax-free retirement savings.
Minimum Payment
Lowest payment card companies accept—usually 1-3% of balance. Paying only the minimum traps you in debt for decades with massive interest.
Mortgage
A mortgage is a loan to buy property, enabling homeownership with manageable payments over time.
Mortgage Equity
The portion of your home's value that you actually own, calculated as home value minus remaining mortgage balance.
Municipal Bond
A municipal bond is a debt security issued by local governments, offering tax-free interest to investors.
Mutual Fund
A professionally managed investment pool that combines money from many investors to buy stocks, bonds, or other securities.
N
Negative Equity
When you owe more on a loan than the asset is worth—also called being 'underwater'.
Net Metering
A billing system that credits solar panel owners for excess electricity they generate and send back to the grid.
Net Profit
Net profit is your total earnings after all expenses; it shows your business's true profitability.
Net Worth
Total assets minus total liabilities—the true measure of your financial health
Net Worth Percentile
Your net worth rank using 2022 Federal Reserve Survey of Consumer Finances percentiles, showing what share of your age group has less wealth.
Nursing Home Care
24-hour skilled care in a licensed facility for people with significant medical or custodial needs.
O
Open Enrollment
Open Enrollment is a designated period to enroll in health coverage, vital for ensuring access to medical services.
Operating Expenses
Operating expenses are the costs required to run a business, crucial for measuring profitability.
Opportunity Cost
The value of the next best alternative you give up when making a choice.
Options
Options are contracts that grant the right to buy or sell an asset at a set price, offering potential profit with limited risk.
Ordinary Income
Income taxed at regular rates—wages, salary, interest, short-term capital gains. Taxed higher than qualified dividends and long-term capital gains.
Origination Fee
An upfront fee charged by lenders to process and approve a loan, typically 0.5-1% of the loan amount.
Out-of-Network
Doctors not contracted with your insurance. Higher costs, lower coverage, potential balance billing. Avoid except emergencies.
Out-of-Pocket Maximum
Most you pay for covered services in a year. Includes deductible, copays, coinsurance. Once hit, insurance pays 100% rest of year.
Over-the-Limit Fee
Fee charged when balance exceeds credit limit—up to $35. Now requires opt-in. Better to decline and have charges rejected than pay fees.
Overdraft
Withdrawal exceeding available account balance
Own Occupation
Disability insurance that pays if you cannot perform the specific duties of your current job—even if you can work elsewhere.
P
P/E Ratio (Price-to-Earnings)
Stock price divided by annual earnings per share. Shows how much you pay per $1 of earnings. Low P/E may be cheap, high may be overvalued.
Parent PLUS Loan
A federal student loan that parents of dependent undergraduate students can borrow to help pay for college costs not covered by other financial aid.
Partnership
A partnership is a business structure where two or more individuals share ownership and profits, maximizing resources and expertise.
Passive Income
Earnings from investments or side ventures that require little ongoing effort, crucial for financial freedom.
Passive Investing
A low-cost investment strategy aiming for long-term growth without frequent trading.
Password Manager
A password manager securely stores and organizes your passwords, enhancing online security and saving time.
Payback Period
The time it takes for an investment to generate enough cash flow to recover its initial cost.
Paycheck To Paycheck
Living paycheck to paycheck means relying on each paycheck to cover immediate expenses, making financial stability challenging.
Payday Loan
A payday loan is a short-term, high-interest loan designed to cover urgent expenses until your next paycheck.
PAYE Plan (Pay As You Earn)
An income-driven repayment plan with 10% discretionary income payments, capped at the Standard amount, with forgiveness after 20 years for recent borrowers.
Payment Frequency
How often you make loan or mortgage payments—monthly, bi-weekly, semi-monthly, or weekly—which can significantly impact total interest paid.
Payment History
Payment history reflects your record of on-time and late payments, influencing your credit score significantly.
Payroll Tax
Tax withheld from employee wages
Payroll Taxes
Payroll taxes fund social programs and are crucial for employee benefits like Social Security and Medicare.
PCE (Personal Consumption Expenditures)
PCE measures consumer spending, crucial for understanding economic health and inflation.
Pension
A pension is a retirement plan that provides regular payments, ensuring financial security in your later years.
Percentage
A fraction or ratio expressed as a number out of 100, denoted by the % symbol.
Personal Loan
A personal loan is an unsecured loan that can help you finance personal expenses, often with lower interest rates than credit cards.
Pet Insurance
Insurance coverage for veterinary expenses and pet health care, ranging from routine visits to emergency surgery.
Phishing
Phishing is a fraudulent attempt to obtain sensitive information, often leading to financial loss.
PMI (Private Mortgage Insurance)
Extra monthly cost added to mortgage if down payment is less than 20% of home value.
Points Mortgage
A points mortgage lets you pay upfront fees to lower your interest rate, saving money over time.
Portfolio Drift
When your actual asset allocation strays from the target mix because some investments outperform others.
Portfolio Optimization
Using math (like Modern Portfolio Theory) to find the mix of assets that maximizes return for a given level of risk.
Portfolio Rebalancing
The process of buying and selling assets to realign your portfolio with its target allocation.
Portfolio Rebalancing
The process of realigning your investment portfolio back to your target asset allocation by buying and selling assets.
Pos
Point of Sale (POS) is where sales transactions occur, crucial for tracking sales and managing inventory.
Power Of Attorney
A legal document allowing someone to make decisions on your behalf, crucial for protecting your interests.
PPO (Preferred Provider Organization)
A PPO offers flexible healthcare choices and lower costs when using in-network providers, promoting better health management.
PPP (Purchasing Power Parity)
An economic measure that compares currencies by how much goods and services they can buy in different countries.
Pre-Approval
Getting financing approved before shopping, giving you negotiating power and budget clarity.
Pre-Tax (Before Tax)
Income or contributions made before taxes are withheld, reducing current taxable income.
Predatory Lending
Predatory lending exploits borrowers with unfair terms, leading to financial harm.
Premium
The regular payment you make to maintain your insurance coverage.
Present Value
The current worth of a future sum of money, calculated by discounting future cash flows at an appropriate interest rate.
Preventive Care
Regular health maintenance (vaccines, cleanings, check-ups) to prevent more expensive problems later.
Price To Earnings Ratio
The Price To Earnings Ratio (P/E) measures stock price relative to earnings, helping assess investment value.
Prime Rate
Interest rate banks charge most creditworthy customers. Usually Fed funds rate + 3%. Credit cards and HELOCs tied to prime rate.
Principal
The original amount of money borrowed in a loan or invested in an account, excluding interest.
Privacy
Privacy protects your personal data, ensuring security and trust in financial transactions.
Private Key
A private key is a secure code that grants access to cryptocurrency, protecting your assets from unauthorized access.
Probate
Probate is the legal process of validating a will, ensuring proper asset distribution after death.
Profit
Profit is the financial gain from business activities, crucial for growth and sustainability.
Profit Margin
Profit margin measures how much profit a company makes for every dollar of sales, indicating financial health.
Progressive Tax System
A tax system where higher incomes are taxed at higher rates, promoting fairness and funding public services.
Property Taxes
Property taxes are mandatory fees on real estate, funding local services like schools and infrastructure.
PSLF (Public Service Loan Forgiveness)
A federal program that forgives remaining student loan debt after 120 qualifying monthly payments while working full-time for a qualifying employer.
Public Key
A public key encrypts data for secure communication, essential for online security and transactions.
Purchasing Power
The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.
Put Option
A put option gives you the right to sell an asset at a set price, protecting against losses.
Q
QCD (Qualified Charitable Distribution)
A tax-free donation of up to $105,000 per year directly from your IRA to charity, available to those age 70½ and older, that counts toward your RMD.
Qualified Dividend
Dividends that meet IRS criteria and are taxed at the lower capital gains rate instead of ordinary income rates.
R
Rate Increase
An increase in insurance premiums after filing a claim or other risk factors change.
Real Estate Appreciation
Real estate appreciation is the increase in property value, enhancing investment returns over time.
Real Return
Investment returns adjusted for inflation, showing the actual increase in purchasing power.
Rebalancing Bands
Pre-set thresholds that tell you when an asset class has drifted enough to trigger a rebalance.
Recession
Economic downturn with declining GDP, rising unemployment, and reduced spending. Technically 2 consecutive quarters of negative GDP growth.
Refinancing
Refinancing replaces your existing debt with a new loan for better terms, saving money and improving cash flow.
Regulation
Regulation ensures fair practices in finance, protecting consumers and maintaining market stability.
Renewable Energy
Energy from sources that naturally replenish themselves and don't run out, such as solar, wind, and hydroelectric power.
Rent Vs Buy
Evaluate whether renting or buying a home is better for your finances and lifestyle.
Renting
Renting is leasing a property, allowing flexibility without long-term commitment and upfront costs like a mortgage.
Required Minimum Distribution
RMDs are mandatory withdrawals from retirement accounts to ensure you use your savings during retirement.
Residual Disability Benefit
A rider that pays partial disability benefits when you can work part-time but lose a portion of your income.
Residual Value
Estimated value of asset at end of lease or useful life
Retirement
Retirement is the planned cessation of work, allowing you to enjoy life without financial stress.
Retirement Age
The age you can start receiving retirement benefits, impacting your financial planning and savings needs.
Revenue
Revenue is the total income generated by a business, crucial for growth and sustainability.
Revenue Recycling
How governments use carbon-tax revenue—through dividends, tax cuts, or clean-energy investments—to soften economic impacts.
Reverse Stock Split
A corporate action that reduces the number of shares outstanding by combining multiple shares into one, proportionally increasing the price per share.
Revocable Trust
A revocable trust is a flexible estate planning tool that allows you to manage assets during your lifetime and simplify transfers after death.
Risk
Risk is the chance of losing money on an investment, which helps you assess potential returns.
Risk Capacity
Risk capacity is your financial ability to take on risk without jeopardizing your goals.
Risk Management
The process of identifying, assessing, and controlling threats to your financial security and goals.
Risk Tolerance
Your willingness and financial ability to absorb potential losses or uncertainty in exchange for potential rewards.
RMD (Required Minimum Distribution)
The minimum amount you must withdraw from retirement accounts annually starting at age 73, whether you need the money or not.
ROAS (Return on Ad Spend)
A marketing metric that measures revenue generated for every dollar spent on advertising.
Robo Advisor
A robo advisor automates investment management, making it easy and affordable for everyone to grow their wealth.
ROI (Return on Investment)
A metric that measures the profitability of an investment by comparing the gain or loss to its cost, expressed as a percentage.
Rolling CD
A CD laddering strategy where you invest in multiple CDs with different maturity dates to balance higher yields with liquidity needs.
Roth Conversion (Roth IRA Conversion)
The process of moving money from a traditional IRA or 401(k) to a Roth IRA by paying taxes on the converted amount now in exchange for tax-free growth and withdrawals later.
Roth IRA
A retirement account funded with after-tax dollars that grows tax-free, with tax-free withdrawals in retirement.
Rule of 72
Divide 72 by an annual return rate to estimate how many years it takes money to double.
S
S-Corporation
An S-Corporation is a tax-efficient business structure that helps reduce self-employment taxes.
Safe Withdrawal Rate (4% Rule)
The percentage of your retirement portfolio you can withdraw annually without running out of money, historically around 4%.
Sales Tax
A consumption tax imposed by governments on the sale of goods and services, typically calculated as a percentage of the purchase price.
SAVE Plan
The newest and most generous federal student loan repayment plan, offering 5-10% payments and interest subsidies for eligible borrowers.
Savings Rate
The savings rate is the percentage of income saved, crucial for building wealth and achieving financial goals.
SBA Loan
A small business loan partially guaranteed by the U.S. Small Business Administration, offering longer terms and lower rates than conventional business loans.
SEC (Securities and Exchange Commission)
The SEC protects investors and maintains fair markets, ensuring transparency in securities transactions.
Section 179
A tax deduction that allows businesses to deduct the full cost of qualifying equipment in the year it's purchased.
Secured Loan
A loan backed by collateral (like a vehicle or property) that the lender can repossess if you default.
Self Employment
Self employment allows individuals to earn income independently, providing flexibility and control over their work life.
Self Employment Tax
A tax on net earnings from self-employment that funds Social Security and Medicare.
SEP IRA (Simplified Employee Pension)
A retirement account for self-employed individuals and small business owners allowing contributions up to 25% of income or $69,000 (2024).
Sequence of Returns Risk
The risk that poor investment returns early in retirement can permanently damage your portfolio, even if long-term averages are good.
Sequence Of Returns Risk
The risk of receiving lower or negative investment returns before retirement can significantly impact your savings longevity.
Service Charge
A mandatory fee added to a bill for service, separate from and in addition to sales tax.
Sharpe Ratio
Risk-adjusted return measure. Higher is better. 1.0+ is good. Compares excess return to volatility—rewards returns, penalizes risk.
Short Sale
A short sale is selling an asset you don't own, aiming to profit from a price drop.
Short Selling
Short selling is a strategy to profit from declining stock prices by borrowing shares and selling them.
Short Term Capital Gains
Profits from assets held for one year or less, taxed at ordinary income rates, impacting your overall tax bill.
Side Hustle
A side hustle is a part-time endeavor that boosts income and enhances financial security.
Simple Interest
Simple interest is a straightforward way to calculate interest on loans or investments, helping you understand total costs or earnings.
Simple Ira
A SIMPLE IRA helps small businesses and their employees save for retirement easily and tax-efficiently.
SIPC (Securities Investor Protection Corporation)
SIPC protects investors by covering losses up to $500,000 if a brokerage fails.
Small Business
A small business is a privately owned company that typically has fewer than 500 employees and plays a crucial role in the economy.
Social Engineering
Manipulative tactics used to deceive individuals into divulging confidential information.
Social Security
A federal program providing financial support during retirement, disability, or death, crucial for income stability.
Social Security Benefits
Monthly payments from the government that help retirees and disabled individuals financially.
Social Security Tax
A payroll tax that funds Social Security benefits, essential for retirement income.
SOFR (Secured Overnight Financing Rate)
SOFR is a benchmark interest rate that reflects the cost of borrowing cash overnight, crucial for loans and derivatives pricing.
Solar Panels
Photovoltaic systems that convert sunlight into electricity for residential and commercial use.
Sole Proprietorship
A sole proprietorship is a simple business structure that offers full control and tax benefits to the owner.
Special Assessment
An extra fee charged by an HOA or condo board for major repairs or improvements not covered by regular HOA dues.
Special Enrollment Period
A time frame allowing you to enroll in health coverage outside the annual open enrollment, crucial for timely access to care.
Speculative Grade
Speculative grade bonds carry higher risk but offer potential for greater returns, making them crucial for savvy investors.
Spousal Benefits
Spousal benefits enhance financial security for partners through social security or pension plans.
Stablecoin
A stablecoin is a cryptocurrency pegged to a stable asset, providing price stability and usability.
Stagflation
Stagnant economy with high inflation—worst of both worlds. Rising prices + high unemployment + no growth. Rare but devastating.
Standard Deduction
A fixed dollar amount that reduces your taxable income, available to all taxpayers who don't itemize.
Standard Repayment Plan
The default 10-year student loan repayment plan with fixed monthly payments, designed to pay off loans completely in 120 equal payments.
Stepped Up Basis
A tax benefit where inherited assets are valued at their current market value, reducing capital gains taxes.
Stock
Stocks are shares in a company, offering potential growth and dividends to investors.
Stock Split
A corporate action that increases the number of shares outstanding by dividing each existing share into multiple shares, proportionally reducing the price per share.
Stress Testing
Simulating extreme market scenarios to see how your portfolio would behave during crashes, recessions, or rate spikes.
Strike Price
The strike price is the predetermined price at which an option can be exercised, crucial for potential profit.
Student Loan Debt
A financial obligation incurred for education, impacting future finances and opportunities.
Subscription Economy
Business model based on recurring subscription revenue
Sunk Cost Fallacy
Continuing to invest in something because you've already spent money on it, even when it's not the best choice.
Survivor Benefits
Survivor benefits provide financial support to dependents after a primary earner's death, ensuring stability.
Sustainable Living
A lifestyle that reduces environmental impact through conscious choices about energy use, transportation, consumption, and waste.
T
Take-Home Pay
Net income after taxes and deductions
Target Date Fund
A mutual fund that automatically adjusts its asset allocation from aggressive to conservative as you approach your target retirement date.
Tax Advantaged Account
A tax-advantaged account helps you save or invest money with tax benefits, maximizing your earnings.
Tax Audit
A tax audit is a review of your financial records by the IRS to ensure accurate tax reporting and compliance.
Tax Bracket
The range of income taxed at a specific rate under the U.S. progressive tax system.
Tax Credit
A dollar-for-dollar reduction in tax liability, providing direct savings on taxes owed.
Tax Deduction
A tax deduction reduces your taxable income, lowering your tax bill and increasing your potential refund.
Tax Refund
A tax refund is money returned to you by the government when you've overpaid your taxes, providing extra cash flow.
Tax Withholding
The amount of federal and state income tax that your employer automatically deducts from each paycheck and sends to the government on your behalf.
Tax-Efficient Rebalancing
Rebalancing strategies that minimize capital gains taxes by using smart trade sequencing.
Tax-Loss Harvesting
Selling investments at a loss to offset capital gains or up to $3,000 of ordinary income each year.
Taxable Account
A taxable account holds investments that incur taxes on gains, providing flexibility for withdrawals and strategies.
Taxable Income
Income that's actually taxed after subtracting deductions from AGI. Used to determine tax bracket and total tax owed.
Term Life Insurance
Life insurance that covers you for a set period (typically 10, 20, or 30 years) with no cash value.
The 4% Rule
The 4% Rule helps retirees withdraw funds safely from savings, ensuring longevity of their portfolio.
The 50/30/20 Rule
A budgeting strategy allocating 50% needs, 30% wants, and 20% savings for financial balance.
Time Horizon
The period until an investment goal is reached, influencing risk and strategy.
Time Units
Different ways to measure time, from seconds and minutes to weeks, years, and decades.
Time Value Of Money
Money available today is worth more than the same amount in the future due to its earning potential.
Tip
A voluntary payment to service workers, typically a percentage of the bill, given as thanks for good service.
Title Loan
A title loan is a quick way to borrow money using your vehicle as collateral, often available with high interest rates.
Total Cost of Ownership (TCO)
The complete cost of owning something over its lifetime, including purchase price, maintenance, insurance, fuel, repairs, and eventual resale value.
Total Cost of Ownership (TCO)
The complete cost of owning something over its entire lifetime, including all purchase, maintenance, and operational expenses.
Traditional IRA
A retirement account with tax-deductible contributions that grow tax-deferred until withdrawal in retirement.
Treasury Bond
A Treasury bond is a long-term government debt security that offers stable interest and low risk.
Trust
A trust is a legal arrangement that manages assets for beneficiaries, ensuring efficient wealth transfer and tax benefits.
Trustee
A trustee manages assets for beneficiaries, ensuring proper distribution and compliance with legal obligations.
Truth In Lending Act
The Truth In Lending Act ensures borrowers receive clear information about loan terms, helping them make informed decisions.
Turnover Ratio
Percentage of fund holdings sold and replaced each year. 100% = entire portfolio traded. High turnover = higher taxes and costs.
Two Factor Authentication
A security measure that requires two forms of verification to access accounts, greatly reducing fraud risk.
U
Underwriting
The process where lenders evaluate your creditworthiness and determine if they'll approve your loan and at what terms.
Unearned Income
Income from sources other than employment, impacting taxes and financial planning.
Unemployment Rate
The unemployment rate measures the percentage of jobless people actively seeking work, highlighting economic health.
Universal Life Insurance
A flexible life insurance that combines coverage with a cash value component for long-term savings.
Unsecured Loan
An unsecured loan is a debt not backed by collateral, offering flexibility but often higher interest rates.
Usury
Usury is the practice of charging excessively high-interest rates on loans, which can lead to financial distress.
V
VA Loan
A zero-down-payment mortgage guaranteed by the Department of Veterans Affairs for eligible military service members, veterans, and surviving spouses.
Variable Annuity
A variable annuity is a retirement product offering investment options with potential for growth and income flexibility.
Variable Expenses
Variable expenses fluctuate and can be controlled, helping you manage your budget effectively.
Vesting
The process of earning full ownership of employer-provided benefits like 401(k) matching contributions or stock options over time.
Volatility
How much an investment's price or returns bounce around over time—higher volatility means larger swings and higher risk.
W
W-2 Form
An annual tax document from employers showing your total wages and taxes withheld for the year.
Wallet Crypto
A digital wallet for storing and managing cryptocurrencies securely, essential for transactions and investments.
Wash Sale Rule
An IRS rule that disallows claiming a capital loss if you buy the same or substantially identical security within 30 days before or after the sale.
Wash Sale Rule
Tax rule that disallows loss deductions if you repurchase the same or substantially identical security within 30 days.
Wealth
Wealth is the accumulation of valuable resources, crucial for financial security and growth.
Wealth Building
The process of systematically increasing your net worth over time
Whole Life Insurance
Permanent coverage that lasts your entire life and builds a slow-growing cash value.
Will
A will is a legal document that specifies how your assets should be distributed after your death, ensuring your wishes are honored.
Y
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